resident Trump’s highly anticipated speech on Tuesday delivered some positive headlines on the ongoing trade spat with China, although investors were left underwhelmed by the lack of fresh details on the state of negotiations. Trump reiterated that a trade deal was ‘close’, although he left the market none the wiser as to whether the striking of the ‘phase one’ deal would ensure the removal of tit-for-tat tariffs.

US inflation numbers for October out this afternoon will be the main economic release in the currency markets, given its impact on Federal Reserve decision making. We think even a fairly sharp slowdown in the headline measure is unlikely to cause the Fed to think about cutting rates in the near term, so a modest surprise to the downside in this afternoon’s numbers are unlikely to trigger too much in the way of a dollar sell-off.

Fed Chair Jerome Powell will then be speaking at around 4pm UK time today at his semi-annual testimony to Congress. We expect Powell to spell out the Fed’s intention to pause its easing cycle for a little while as it awaits news on how the bank’s recent rate cuts are impacting the US economy.

Johnson extends lead in the polls

The release of the latest YouGov poll showing a commanding 14% advantage for the Conservative Party failed to inspire a rally in sterling this morning, which edged modestly lower as markets opened.

A string of macroeconomic data will be released this morning, the most important of which being the latest UK inflation numbers for October. Investors are eyeing a modest slowdown in the figure to 1.6% year-on-year from 1.7%. Should this lack of inflationary pressure be confirmed, we’d likely see even more bets in favour of a Bank of England rate cut some time in early-2020. With two members on the MPC voting in favour of an immediate cut last week, the bar for cuts is not quite as high as we had first thought.

New Zealand dollar flies higher on RBNZ decision

Elsewhere, the biggest mover overnight was the New Zealand dollar, which soared by around one percent following the latest RBNZ meeting. The central bank unexpectedly held rates steady after investors had priced in around a 75% chance of an immediate cut. Policymakers at the RBNZ also showed no urgency to ease policy again any time soon, joining the Federal Reserve in signalling that it is likely to pause as it awaits news on how the economy is performing before deciding on the next policy move.