GBP 

Sterling slid to a two-month low against
the dollar after the rate of inflation came in at just 2.2% in October,
tumbling from 2.7% the previous month and much lower than economists had
expected. This is the lowest UK inflation rate in four years.

GBP 

Sterling slid to a two-month low against
the dollar after the rate of inflation came in at just 2.2% in October,
tumbling from 2.7% the previous month and much lower than economists had
expected. This is the lowest UK inflation rate in four years.

Plenty of economists were quick to note
that at 2.2%, it is still three times the average pace of wage growth. This
highlights the fact that real wages are in fact falling in the UK and many
households are still struggling.

Lower inflation was driven by cheaper
fuel prices and smaller rises in university tuition fees than this time last
year; however economists were quick to warn that with energy price hikes
on the horizon consumers would continue to feel big strains on their
budgets.
This could prove a difficult time for retailers in the crucial Christmas
spending period.

EUR

In Germany
October inflation fell to the lowest level in three years to just 1.2% adding
fears to weak demand across the Eurozone this data suggests that the European
Central Bank was right to cut interest rates to a new record low last week of 0.25%

Inflation is also dropping in the Czech Republic – where the
consumer prices index dropped to just 0.9% year on year in October. According to Reuters, is the lowest level since 1974.

This fear of deflation prompted the Czech
central bank to intervene and devalue their currency earlier in the week by
nearly 3%. 

Today 

All
eyes will be on the UK today where the Bank of England will release their
quarterly inflation report. Following this Governor Mark Carney will discuss
how he feels the forward guidance is working out. The BOE will not look to
lower interest rates until unemployment reaches 7%. Currently unemployment is
at 7.7%, with many economists in the belief that the UK is on track to fall to
7% before 2016. 

However
a word of caution. Whilst many are expecting growth forecasts to be revised
higher; there is a possibility that the tone and content of Carney’s speech may
not match the expectations of the market, and this could prompt a sterling sell
off. 

Eurozone
industrial production is forecasted to fall by 0.3% for October, which could put
pressure on the euro.

Key Announcements: 

9.30am – GBP – Claimant Count Change (Sep): Expected to
fall by 35,000.

9.30am – GBP – Unemployment Rate (Sep): Expected to fall
to 7.6%.

10.00am – EUR – Industrial Production (Sep): Expected to
fall by 0.3% month on month.

10.30am – GBP – Bank of England Quarterly Inflation
Report.

12.10pm – EUR – German Central Banker Jens Weidmann Speech.

19.00pm – USD – Monthly Budget Statement.