Summary:

• USD gains ground across the board while GBP lacks bullish momentum despite higher inflation
• NZD resists the strong greenback following higher than expected CPI
• ZAR suffers after Zuma named a close ally as energy minister and dismissed the leader of the communist party

Tuesday on the FX market has been quite choppy thus far and it seems as if the greenback has been (almost) the sole currency being able to benefit from higher volatility. The US dollar is gaining ground against its all major peers in the G10 basket except the NZ dollar, the latter got a boost after the better than estimated inflation report. However, politics might undercut the NZD’s performance in the short-term as we haven’t gotten yet a final decision from First Party’s leader Winston Peters who his party is going to back after the NZ elections in order to forge a new government.

UK inflation climbed in September to its highest level in more than five years coming in at 3% yoy in case of the headline print and 2.7% yoy when it comes to the core measure stripping out the most volatile components – both gauges turned out to be in line with expectations though. The pound saw a knee-jerk decline due to a touch weaker than expected Producer Price Index but it managed to recoup its losses partially. Either way, the pound has lost a lot since the inflation report’s release probably due to Carney’s appearance as he has looked past an opportunity to help shore up the British currency expressing straightforwardly hawkish comments.

The feebler performance of the GBP has come up despite reassurances from Carney that a rate hike may be proper in coming months but it seems to be too less to prop up the GBP given the odds for a rate increase in November are lofty and therefore a bar for the pound is set high. He’s also alluded to Brexit saying that he believes that a transition period will be achieved finally which is in the EU’s interest as well. Moreover Ramsden, being a newbie to the MPC, said that he hadn’t been in the majority of the MPC members who had seen a case for removing stimulus in coming months.

Whipping though the FX market beyond the G10 basket one could notice that the South African rand is already losing 1% against the USD, a move which has been sparked by a decision made by the President Jacob Zuma. He named a close ally as energy minister and dismissed the leader of the communist party, which has criticized his leadership, just two month before he is due to step down as leader of the ruling African Nation Congress.

Irrespective of subsequent warnings from North Korea that a nuclear war “may break out any moment” the global stock markets remained little changed. The Kim Jong-Un’s regime decided to warn the world because the US and South Korea began one of the largest joint naval drills off both the east and west coast of the peninsula. Moreover, North Korea said reportedly that it would reject diplomacy with the US for now. Despite those remarks and threats the Wall Street managed to close higher, in turn the European stock markets have been subdued thus far.

The beginning of the week has been remarkably benign in terms of the cryptocurrency market as all the most important digital currencies have been on the sidelines so far. Irrespective of that calm we’ve gotten some promising reports from Australia where the local government has sought recently to amend its Bitcoin regulations which were previously notoriously unfavorable to businesses and individuals.

Looking forward we’re going to have industrial production from the US economy which might be afflicted by the hurricanes though. Besides, several central bank speakers are going to have their speeches later in the day. The full macroeconomic calendar for today may be found under this link.