On Tuesday, the pair drafted lower after the release of higher-than-expected CPI figures which showed that U.K. inflation accelerated to 5.2% in September, for the first time since September 2008, from 4.5% in August, above expectations of 4.9%, raising concerns the British economy is in the brink of a stagflation.
However, the general sentiment in the market is once again fueled with concerns as the European anti-debt crisis plan, which will be introduced on October 23, will not provide a complete fix to the two-year crisis, according to the latest announcements by German officials.
Still, the main focus is on the euro area to see European leaders’ ability to come out with a comprehensive and decisive plan at their next meeting. Thus, after the dovish tone seen this week from German officials, investors resorted to the dollar once again as a favorite safe haven.
Moreover, the Chinese economy expanded 9.1% in the three months ended September compared with 9.5% growth in the second quarter and median estimates of 9.3%, adding to worries that the sluggish growth pace would continue in the fourth quarter.
On the other hand, the pound is weighed down by expectations the BoE will add further stimulus to boost growth.
On Wednesday, at 08:30 GMT, attention will be toward BoE minutes for October’s monetary decision which may show a split among policy makers as some may have supported Adam Posen in adding 75 billion pounds to the APF in October while others opposed it.
In the U.S., the day is going to witness the release of many important fundamentals; the start will be with MBA mortgage applications for October 14 which will be available at 11:00 GMT, followed by housing starts and building permits and CPI at 12:30 GMT.
Housing starts, which will provide evidence about the status of the housing market that triggered the 2008 crisis, are expected to increase to 594,000 in September from 571,000 in August, while building permits will probably show a fall to 610,000 from the prior 620,000.
On the other hand, CPI for the year ended September is predicted to rise to 2.1% from the preceding 2.0%. Thereafter, eyes will be on the Fed Beige book at 18:00 GMT.
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