- Sterling yoyos on good data and questionable Brexit news
- EU inflation likely overshadowed by EU summit
- Canadian manufacturing data forecast to be poor
By David Johnson
The markets were very enthusiastic about UK average base wage growth stepping up to 3.1% in the year to June. That is above consumer inflation and is therefore positive for GDP growth. It also gives the Bank of England a reason to raise interest rates if they want one. Sterling rose to €1.14 and to $1.32 but has fallen back this morning as UK Prime Minister Theresa May heads to the lion’s den in the EU to try again to negotiate a deal. The last major sticking point is the land border within the Island of Ireland and that is a definite impasse. It is feared that a hard border will reignite sectarian violence, a soft border would be leakier than a colander and moving the customs checks to the landing points in the mainland UK would incense the DUP, a party Theresa May needs to stay friends with. Tricky.
We will get the latest set of UK inflation data this morning, so we will get to see if disposable incomes are still growing. If the forecasts are right, the gap will widen between wage growth and cost of living rises and that will support the Pound.
EU inflation likely overshadowed by EU summit
We will also get Eurozone inflation data today. No major change is envisaged, so it may be a damp squib. The Brexit summit is bound to overshadow the data anyway.
US data today is dominated by housing starts and building permits figures. This is a good bellwether for the US economy, so we will watch that with interest. The Saudi assassination accusations have the potential to blow up in the US President’s face as he seeks to find a face-saver for the Crown Prince in the House of Saud. That could have repercussions for the USD, so large is the arms trade done between the US and Saudi Arabia.
Canadian manufacturing data forecast to be poor
The Canadian Dollar is one to watch today. Manufacturing sales data is expected to be pretty dire. 0.9% growth in the previous month could well fall into a 0.6% decline in August. The Canadian Dollar will slip if that is the case.
And we have a few central bankers speaking today as well. It will be a lively one.
In a remote part of Midwest America, a farm boy accidentally overturned his wagon-load of corn. The farmer who lived nearby and was in the middle of his supper, heard the noise. "Hey Wilmer!" the farmer yelled. "Forget your troubles. Come in and have a bite with us. Then I'll help you get the wagon upright and we can reload the corn."
"That's mighty nice of you," Wilmer answered. "But I don't think Pa would like me to…."
"Aw, come on." the farmer insisted.
"Well okay," the boy finally agreed, and added, "But Pa won't like it."
After a 3 course dinner, Wilmer thanked his host. "I feel a lot better now, but I know Pa is going to be real upset."
"I am sure he’ll be fine," said the neighbour with a smile. "By the way, where is your Pa?"
Wilmer replied, "Under the wagon."