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Sterling boosted by employment figures

Published: Tuesday 16 October 2018

  • Aussie rates to head higher by when?
  • Strong New Zealand inflation data boosts New Zealand Dollar
​​By David Johnson

The Saudis seem to be testing the mood with rumours that journalist Jamal Khashoggi dies in a botched interrogation. Perhaps they feel it is OK to interrogate someone to within an inch of their lives and then, when things go too far, declare ‘yes we did it but it was an accident’ and that makes things alright. Obviously that isn’t acceptable, but whether the vested interests will stifle them being held to account is another matter.
Pound boosted by employment data, despite no deal fears
In other news, despite the increasing speculation that the ‘no deal’ outcome on the Brexit negotiations is much more likely, the Pound held its ground yesterday and actually rose this morning. Alongside the Brexit speculation, employment data from the UK remains at 4.0%, and UK regular pay has risen 3.1% year-on-year, above expectations, helping the Pound push above 1.32.
Euro could also react to Brexit news

The Eurozone received more disappointing news in the form of the German ZEW Economic Sentiment Index, which has been poor of late, and this time came in well below expectations.  The index – a key indicator of investor confidence – dropped dramatically in October to -24.7. Of course, the Brexit wrangling also impacts the EU, so watch the news for changes there; the Euro will react, but perhaps to a lesser extent than the Pound.
Australian interest rates could go up soon…

We had minutes from the Reserve Bank of Australia (RBA) released overnight and the tone suggested that the next interest rate movement would be a hike. That should have strengthened the Australian Dollar, but it didn’t. In fact the GBPAUD exchange rate rose in later trade. It’s hard to fathom why, but perhaps the markets had already priced the direction of travel into the value of the currency?
New Zealand inflation better than anticipated

We also had inflation data from New Zealand and that was much better than expected. 1.9% on an annual basis was well above market forecasts and 0.4% higher than the Q2 figure. The New Zealand Dollar has been weakening and that does influence the price of imported goods, but that probably doesn’t account for the whole move. The NZD gained about four cents against the Pound since yesterday’s high, but is hovering around the magic NZ$2.00 to the Pound.
The overnight news from China showed a rise to 2.5% in consumer inflation and that was in line with the general consensus forecast.
US Dollar weakens on data disappointment and remains vulnerable

The US Dollar weakened yesterday when the retail sales data disappointed. The markets had been excitedly forecasting 0.7% growth but saw an actual figure of just 0.1%. That was slightly offset by Empire State manufacturing survey which produced a rise in the index to 21.1 compared to last month’s 19.0. This afternoon brings US industrial production and a couple of Federal Reserve members delivering speeches. With the potential for sanctions against Saudi Arabia and further sanctions against China, the USD is vulnerable.
Wilde Thing

And on this day in 1854, Oscar Wilde was born. I mention it because, there is only one thing in the world worse than being talked about and that is not being talked about.

Steven Spielberg decides he wants to do a blockbuster, all action movie about composers. He calls in a number of top actors to scope out the project and narrows down his choices to Arnold Schwarzenegger, Tom Cruise and Bruce Willis. They have a casting meeting.
Tom says, "I have always been an admirer of Chopin, so I'd like that part if everyone agrees". They all think it is a perfect part for him.
Bruce says, "Mozart was a genius in my eyes and I think I have an angle on his character. I believe he  wore vests, so I'd like to play him". There were nods around the room and they all turned to Arnie.
He thought for a long time before staring at them with a stern expression and saying, "I'll be Bach".

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Average Earnings Index 2.6% 2.6%
GBP 09:30 UK: Unemployment Rate 4.0% 4.0%
GBP 09:30 UK: Claimant Count Change 8.7k 4.5k
EUR 10:00 EU: Trade Balance 12.8b 15.0b
EUR 10:00 EU: ZEW Economic Sentiment -7.2 -10.6
CAD 13:30 Canada: Foreign Securities Purchases 12.65b 10.05b
USD 14:15 US: Capacity Utilization Rate 78.1% 78.2%
USD 14:15 US: Industrial Production 0.4% 0.2%

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