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All eyes on UK Prime Minister’s speech

Published: Wednesday 03 October 2018

  • UK Prime Minister’s speech awaited
  • Sterling awaits service sector Purchasing Managers’ Index
  • Australian building approvals slump
​​By David Johnson

The UK Prime Minister will give one of the most important speeches of her political career today when she addresses the Tory Party Conference. This follows yesterday’s speech by her arch nemesis, Boris Johnson, who gave a speech which poured scorn on Theresa May’s Chequers Brexit plan, but urged party members to get behind her. Quite what he plans to do when they are all behind her is another matter.  Sterling largely ignored the politicking, but may be affected by this afternoon’s Prime Minister’s speech. The Pound will also be affected by the Service Sector Purchasing Managers’ Index (PMI) which is due this morning. The forecasts are for a small dip in this index, but that was also the case for the construction sector one we saw yesterday and the actual result for that was pretty poor.
Australian Dollar dilemma continues
Overnight, we saw a sharp drop in Australian building approvals. A 9.4% drop on the month is far worse than expected; the markets had forecast a small scale improvement. It points to one of the Reserve Bank of Australia’s dilemmas. They have positive economic data in many areas, but the housing market is still not growing. The Australian Dollar weakened a little on the news, after a very positive day on Tuesday.
Euro could use a helping hand today
This morning brings Eurozone retail sales data. That is expected to show a recovery of circa 0.2% after a similarly sized contraction last month. The Euro could do with some support as the Italian budget debate rages on.
US Dollar climbing back up
This afternoon brings a little bit of US data. The US Service Sector PMI and a composite one of all sectors are due, plus crude oil inventories and three speeches from Federal Reserve members. The US Dollar is having a bit of a resurgence after the US Mexico Canada trade deal, so any opportunity to take profit on that USD strength will be seized upon by traders. Yesterday’s speech by the US president which attacked Jean Claud Juncker was interesting. Not content with battling China, the US is seeking to do battle with the EU over trade. Join the club, Mr President…
The Naked Truth
The Truth and the Lie meet one day. The Lie says to the Truth: "It's a marvellous day today"! The Truth looks up to the skies and sighs, for the day was indeed really beautiful. The Lie and the Truth spend some time together in the sunshine, ultimately arriving beside a well. The Lie tells the Truth: "The water is very nice, let's take a dip." The Truth, once again suspicious, tests the water and discovers that it indeed is very nice. They undress and start bathing. Suddenly, the Lie jumps out of the water, puts on the Truth’s clothes and runs away. The furious Truth comes out of the well and searches everywhere to find the Lie and to get her clothes back but cannot. The World, seeing the Truth naked, turns its gaze away, with contempt and rage.

The poor Truth returns to the well and disappears forever, hiding its shame within. Ever since that day, the Lie has travelled around the world, dressed as the Truth, satisfying the needs of society, because, the World, in any case, harbours no wish at all to see the naked Truth.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 Services Purchasing Managers' Index 54.3 54.0
EUR 10:00 EU: Retail Sales -0.2% 0.2%
USD 13:15 US: ADP Non-Farm Employment Change 163k 185k
USD 14:45 US: Final Services Purchasing Managers' Index 52.9 52.9
USD 15:00 US: ISM Non-Manufacturing Purchasing Managers' Index 58.5 52.9
USD 15:30 US: Crude Oil Inventories 1.9m 1.1m

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