CPI nearly flat and snap election threat

Key Movers

Prime minister Boris Johnson announced on Tuesday that he would be imposing tougher lockdown restrictions on Greater Manchester starting Friday. Pursuing a localized strategy of imposing three tiers of increasingly stringent restrictions, Manchester will now enter tier 3, the tier with the most restrictions. Johnson has been resisting pressure for a second lockdown, fearful of the economic effects, but the resistance may not last with the UK confirming 21,331 new cases and 241 deaths on Tuesday. Britain’s government borrowing exceeded forecast in September, official data showed earlier this morning. Over the first half of this financial year borrowing was up more than six times higher than a year earlier, due to the huge cost of the coronavirus pandemic. British Finance Minister Rishi Sunak said that things could have been far worse had the government not acted to protect livelihoods.The Australian dollar downtrend continued through trade on Tuesday, testing key supports at 0.7020 before finding some upward momentum through the overnight session. The Royal Bank of Australia released the minutes of its October meeting and the sentiment very much echoed comments from Governor Philip Lowe last week. Further policy easing will gain traction now the initial shock of the pandemic has subsided, and the economy is entering a new stage of recovery. All in all, it points to a likely rate cut and the introduction of new quantitative easing measures in November. Having touched intraday lows at 0.7022 the AUD rebounded in the latter half of the overnight session. A rebound in equities and a weaker USD helped the AUD reverse losses and push back toward highs at 0.7070 before edging lower into this morning’s open. With little of note on today’s calendar we expect the AUD will struggle to mount any significant upward push. The recent string of dovish RBA commentary has taken much of the wind out of the Australian Dollar while fluctuations in risk sentiment afford little opportunity for a sustained risk led run.