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Budget big news for UK today

Published: Monday 29 October 2018

  • Australian Dollar stronger on housing data
  • Sterling poised ahead of UK Budget statement
  • US Dollar strong as markets await consumption and expenditure data
​​By David Johnson

Rising Australian Dollar adds pressure to increase interest rates

Australia’s Housing Industry Association reported a rebound in new home sales this month of 1.1% compared to the monthly decline of 2.9% last month. That has bolstered the AUD and adds to the pressure on the Reserve Bank of Australia to start contemplating an interest rate hike after a very extended period of record low rates. We will get Australia’s latest consumer inflation data on Wednesday and that too is forecast to be upward. The pressure is building and traders are buying the AUD ahead of the events, as they do. Be warned…
Budget big news for UK today

The big news for UK traders will be the Chancellor’s new Autumn Budget speech.  To me, Phillip Hammond always looks like he has a ‘special secret’ that only he knows, but he was looking blatantly smug over the weekend. I think we can take that as a hint that he has found the combination to the Treasury’s wallet and will be spending some extra cash. Sterling will react, but the nature of that reaction will depend on just how skilfully the cheque book is wielded. (For younger readers, a cheque book was the forerunner for Near Field Communication (NFC) and Apple Pay, but more cumbersome). We won’t have to wait long, his speech happens today. Brace yourselves for the promises and backlash. Rumour has it that the Chancellor will try to stimulate town centre traders on high streets by cutting business rates for small shops. That would be a very welcome thing, I am certain, but local councils seem to go out of their way to stop people even getting to town centre shops unless they take a bus. Making it easier to stop near the shops and to park in time-limited zones would probably have a greater effect than business rate changes. The Bank of England (BoE) will make its interest rate announcement this week, too, but no change is expected. The tone of the BoE’s Governor’s statement will be the key for Sterling’s second bout of volatility this week.
US Dollar could get stronger still…

As well as the UK Chancellor’s speech, this afternoon brings the US Personal Income and Expenditure data, which, many believe, will indicate a rise in spending and a small increase in disposable income for US workers. The US Dollar, which is already very strong, could gain more ground, but it is stagnating at $1.28 against Sterling and $1.13 against the Euro. The other big event for the US Dollar this week will be Friday’s employment report. Another good one is forecast, so further USD strength could hit us before the weekend.
Canadian Dollar also likely to rise this week

The Canadian Dollar will also have a lively week; Gross Domestic Product (GDP) growth and employment data are the main events. Further employment growth and a small uptick in economic growth are expected, and we’ll get a speech from the Governor of the Bank of Canada to keeps things moving. CAD strength is the most likely scenario this week.
Pole Position

And well done to Lewis Hamilton. Five world titles in Formula One; the most successful UK driver ever. It has been a pleasure to see his progression.
Car jokes 
  • With the rise of self-driving vehicles, it's only a matter of time before we get a country song where a guy's truck leaves him too
  • A guy says to the car dealer, ‘I’d like a small hatchback for my girlfriend’. The dealer looks into the passenger seat at his beautiful girlfriend and says to the guy, ‘Ok, that’s a fair trade’.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 10:30 UK: Net Lending to Individuals 4.0b 4.1b
GBP 10:30 UK: M4 Money Supply 0.2% 0.3%
GBP 10:30 UK: Mortgage Approvals 66k 65k
USD 13:30 US: Core Personal Consumption Expenditures Price Index 0.0% 0.1%
USD 13:30 US: Personal Spending 0.3% 0.4%
USD 13:30 US: Personal Income 0.3% 0.4%

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