Summary:

• Antipodean currencies march higher despite unfavourable domestic data and mixed sentiment in China
• The UK inflation speeds up, however, GBP quickly erases gains
• Oil prices rise as the North Sea pipeline has been shut down

Antipodean currencies continue a winning streak started this week. As of time of writing AUD is the strongest currency in G10, gaining over 0.60% against USD despite feeble domestic data. Moreover, GBP spiked after the release of the UK CPI numbers, although, it has quickly pulled back. When it comes to commodities, oil prices have returned in the vicinity of highs before OPEC meeting due to North Sea pipeline shutdown. 

In defiance of expectations, UK headline inflation accelerated in the past month to its five and a half years peak forcing BoE governor Mark Carney to explain why price growth deviated more than one percentage point from the official inflation target. As a result, the UK 10Y yield jumped 2bps while the British currency gained a foothold but it handed back increases afterwards. Having said that an acceleration of price growth should not have caught investors off-guard given the latest PMI survey when we emphasized that a peak of inflation had not been passed yet.

There has been a rising demand for commodity-related currencies as NZD, CAD, and AUD have gained the most thus far. While the former could still benefit from an appointment of the new governor Adrian Orr, the Canadian dollar is taking advantage of increasing higher prices (those moved higher on Monday even as the speculative net long positioning had remained extremely high). Finally, the Australian dollar seems to follow its peers as investors completely downplayed more gloomy business conditions and confidence. According to NAB the conditions index slumped from 21 to 12 whilst the confidence gauge decreased from 8 to 6 in the past month.

The oil has been advancing recently due to supply concerns. The North Sea pipeline closure has pushed the crude prices towards highs before the latest OPEC meeting – Brent (OIL on xStation5) is traded above $65 and WTI (OIL.WTI) hovers around $58.40 handle. It’s one of the biggest pipelines, which can carry as much as 450k bpd. The installation was shut down after a crack was discovered.

Although the UK inflation report seemed to steal the headlines before noon, the Swedish price growth numbers had a well larger impact on the SEK compared to a muted response seen in the pound. A surge came on the heels of unexpectedly strong inflation releases pointing that price growth came back again to the Riksbank’s objective, the move which could be conclusive in terms of the future of the ongoing bond-buying programme. In effect, the Swedish krona is by far the best performing currency being up against the greenback almost 0.80% at the time of writing.

The global stock indices have been wobbling of late. After new record highs on Wall Street, the Asian equities pulled back and the European benchmarks were traded flat at the opening. It suggests that a Santa rally has not come yet. Interestingly, the US stocks moved higher yesterday despite a reported explosion in New York which was called as a terrorist attack. Investors await inflation data from the US today and the Fed meeting on Wednesday.