UK: Data may challenge GBP but risks to the upside from here - BNPP

Research Team at BNP Paribas, suggests that the UK CPI data for September are expected to show an increase in the y/y rate to 0.8% from the 0.6% prevailing the previous two months.

Key Quotes

“However, this increase has more to do with crude prices and is consistent with developments in other G10 economies. Our economists note it will take some more time for the effects of GBP weakness to begin showing up in price data. We also expect August labour market data to record a sharp drop in jobs gains on a 3m basis, as signalled by monthly data already released.

Data and news flow is likely to remain challenging for the GBP for the time being, but with short positioning stretched and our models signalling cheapness, we see scope for a squeeze higher on upside surprises and would not attempt to chase the currency lower from here.

Elsewhere in Europe, we look for the ECB to emphasize willingness to continue stimulus this week but to leave a final announcement on extending QE beyond March to the December meeting.”