US data dampens view that US interest rates will rise in November – 15th October 2015

US retail sales yesterday were pretty disappointing for September. There were up by 2.4% compared with September 2014 but the monthly rise of only 0.1% from August was miserable. At the same time as retail sales, the US producer price index, which tracks factory gate prices, was reported to have fallen by a monthly -0.5%, putting it -1.1% lower on the year. Clearly then there was nothing among the data to encourage the Federal Open Market Committee to raise interest rates when it meets in a fortnight’s time. Investors came to the conclusion that an increase this month was even less likely, so they sold the US Dollar leaving it as Wednesday’s weakest performer, falling by a cent against the Euro and giving up two cents to Sterling.

In the UK, employment figures did not smash analysts’ forecasts but they were there or thereabouts. Average earnings were up by an annual 3.0%, beating inflation by a handy 3.1%, and unemployment fell to 5.4%, its lowest level in more than seven years. Sterling reacted positively, picking up two thirds of a Euro cent and strengthening by an average of 0.3% against the other dozen most actively-traded currencies. Its only losses were to the antipodean dollars and the South African Rand. All three benefited from the dampening of US interest rate expectations.

The Australian Dollar was hampered by the less-than-inspiring employment figures that came out overnight. Whilst the 6.3% unemployment rate was a touch better than expected, the loss of 14,000 full-time jobs and the -5,000 fall in overall employment were not. The Kiwi Dollar received a little help from the NZ purchasing managers’ index, which improved from 55.1 to 55.4.

Today the highlight during the London session will be the US inflation data and tonight investors will be watching the inflation figures from New Zealand.

The US inflation reading will be doubly important following yesterday’s retail sales numbers. After rising by 0.2% in the year to August there is every chance that consumer prices will be down by -0.2% in the year to September. Falling prices would be seen as another reason for investors not to hold their breath in anticipation of higher interest rates and, potentially, as another reason to sell the US Dollar further.

New Zealand’s quarterly consumer price index is expected to show inflation slowing from 0.4% to 0.2%. Any lower number could hurt the Kiwi Dollar.