Two BOE members warn against early interest rate hikes

Two members of the Bank of England’s Monetary Policy Committee have aired cautionary messages about the prospects of early interest rate rises. Catherine Mann warned that the markets have already tightened financial conditions and Silvana Tenreyro warned that any hike used to contain temporary inflation would be “self-defeating”. I have to say, I tend to agree. After the ravages of the last 19 months, it would be unwise to place too much weight on any year-on-year data calculations.

Sterling bounces in spite of poor car registrations

Nonetheless, these comments did calm the pound to some degree. GBPUSD dipped to $1.3665 yesterday but is back above $1.3700 this morning. The GBPEUR rate dropped to €1.1780 but is back just above €1.18 this morning. It is hard to exactly put your finger on the reason for the Pound’s bounce this morning but the moves by the government to relax some rules on foreign HGV drivers and efforts to recruit overseas butchers to avoid an unnecessary pig cull may be seen as evidence of a desire to get the current problems sorted.

This morning’s GBP bounce can be seen in other currency pairs as well. GBPAUD is up half a cent to AUD 1.8485, GBPNZD is up three-quarters of a cent to NZD 1.9450 and GBPCAD is up a slightly less impressive 1/3 of a cent to CAD 1.6930.

US retail sales awaited

This isn’t a big day for data but US retail sales numbers will be influential. A 0.2% decline in sales in September is the most likely outcome. So anything substantially different to that will shift the USD. However, investors are getting a little bolder and the term ‘risk on’ is being bandied around. Hence the sale of USD and the purchase of other higher-yielding assets. The EURUSD rate is a little higher this morning at $1.1615 and the trend for this pair is still upward.

Eurozone car registrations saw worst September since 1995

This afternoon sees the release of Canada’s new motor sales data. For comparison, look at the UK data which showed a 34.4% y/y drop in new registrations in September, and the EU which posted a 25% drop. That was their worst September result since 1995. If Canada’s data is anything like that, expect CAD weakness. I guess that goes without saying.

And it is a day to celebrate the birth of Friedrich Nietzsche who was born on this day in 1844. As well as the concept of, ‘That which does not kill us makes us stronger, he also wrote, “All things are subject to interpretation. Whichever interpretation prevails at a given time is a function of power and not the truth” Isn’t that the truth.

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