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September

Brexit deal in sight?

Published: Wednesday 19 September 2018

  • Sterling flat ahead of inflation data
  • Brexit deal seems more likely
  • Trade wars weaken Yen
  • New Zealand economic growth data tonight
​​By David Johnson

If you discount Brexit, Sterling’s big news item for today is the inflation rate. A pick up was expected in the monthly inflation rate, but little change in the headline annual rate, expected to remain at around 2.4%. The results were surprisingly positive. The annual UK Consumer Prices Index (CPI) rate came was 2.7% for August 2018, an improvement on the figure of  2.5% seen in July.  

Core inflation came in at 2.1%, a jump up from July’s 1.9% and exceeding expectations of 1.8%. Month-on-month, UK consumer prices increased to a figure of 1.7% for August 2018, again, significantly higher than the 0.5% forecast.

Sterling has had a couple of quite flat days and that was likely to be the pattern today until this inflation data was seen to be very different to the forecasts. We should now settle down a bit after Sterling jumped half a cent unless something significant happens over Brexit (like a deal on the Irish border). If that happens, the Pound will advance and that will also happen if Andy Haldane, from the Bank of England, says anything positive about the UK economy. It isn’t likely, but there is scope for volatility although it isn’t something you can count on.
 
EU also awaiting positive Brexit news
 
We’ll get a speech from the head of the European Central Bank (ECB) today and that is about the only interesting thing likely to emanate from the EU (currency wise). The Euro is also in thrall of the Brexit negotiations because of their importance to the future of export sales for EU states, apart from a lot of other factors. The EU is still very worried about the state of the Italian economy and that is a troubling factor for those who would invest in the EU. It doesn’t appear to be worrying MPs in Italy, though; they have just launched a bid to host the 2026 winter Olympics.
 
Chinese trade tariff implications for international trade
 
The Japanese Yen is weaker as the threats of US and Chinese tariff wars weigh on international trade. Mind you, a weaker currency aids exports, so it isn’t a bad thing. The Bank of Japan voted 7-2 to keep the base rate unchanged. That was widely expected, so will not have made much difference to the value of Japan’s currency.
 
New Zealand Dollar still struggling
 
Overnight tonight we will see New Zealand’s economic growth data. However, many believe, such is the fragility of the recovery, that even if the Gross Domestic Product (GDP) growth is strong in this dataset, there is still a good chance that the Reserve Bank of New Zealand (RBNZ) will cut the base rate again in the future. The Kiwi Dollar remains weak.
 
On yer bike!
 
And if you have just commuted, or been out, on your bike, I have a story that will make you feel either terrified or inadequate. Denise Mueller-Korenek has just clocked up 183.9 miles per hour on her bike. She was towed behind a dragster and then pedalled on in its slipstream, but she hit the top speed under her own power. Crikey O’Reilly , that is quick, although when I used to ride my Raleigh Chopper at full pelt, I am sure it felt just the same.
Two turkeys walk into a bar…
 
Two wild turkeys walk into a cocktail bar and the bartender says, “Wow, you’ll never believe this, but we have a drink named after you.”
 
One of the wild turkeys turns to his friend and says, “Crikey, they have a cocktail called Eugene?”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Current Account 23.5b 22.4b
GBP 09:30 UK: Consumer Price Index 2.5% 2.4%
GBP 09:30 UK: Core Consumer Price Index 1.9% 1.8%
GBP 09:30 UK: Retail Price Index 3.2% 3.2%
GBP 09:30 UK: Producer Price Index Input 0.5% 0.4%
USD 13:30 US: Building Permits 1.31m 1.31m
USD 13:30 US: Housing Starts 1.17m 1.24m
USD 15:30 US: Crude Oil Inventories -5.3m -2.7m
NZD 23:45 New Zealand: Gross Domestic Product 0.5% 0.8%

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