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July 2017

Sterling slips on inflation dip

Published: Monday 14 August 2017

  • Sterling slips on inflation dip
  • South African data likely to disappoint
By David Johnson
 
I am still hiding under the bed after last night’s apocalyptic storms in the South East. So please excuse the jerky typing. Wow, Mrs Nature sure is impressive when she gets angry!
 
Yesterday’s markets were less tumultuous, but there was something for everybody. The dip in UK inflation is the headline that made most news reporting, but it has to be seen in context. A 2.6% figure – down from last month’s 2.9% – looks significant, but energy prices fell a little and; more significantly, from March 2015 to June 2016 there was virtually zero inflation. These figures are all calculated on a year-on-year basis, so this June 2017 dataset is comparing with a very low starting point. 
 
Nonetheless, such is the jitteriness (is that even a word?) of the markets at the moment, the Pound dived a cent or so against the Euro, but remained relatively strong against the US Dollar. Sterling did recover a little in later trade ahead of tomorrow’s Retail Sales figures which, given the improved weather, ought to be rather more upbeat than the inflation numbers.
 
There weren’t any heavyweight US data releases yesterday, but further rumour and speculation is circulating over Donald Trump’s relationship with Vladimir Putin and an undocumented meeting between the two.  Top tier US data today is as rare as a straight answer in a political press conference, so the weakened US Dollar is likely to remain weak. We do get to see the housing starts and building permits, but that is unlikely to be market moving.
 
In fact, the most significant data today comes from South Africa. Inflation is forecast to have slipped a little and Retail Sales likewise. The Rand could have a bad day at the office, but it is unlikely the South African Reserve Bank will move their 7.0% base rate when they meet tomorrow. 
 
Overnight tonight, we will get Australian employment data and that could show a small rise in the unemployment rate. Some analysts are predicting a mover from 5.5% to 5.6%. We should see a weaker Aussie Dollar if that is the case.
 
And, while England’s men’s cricket team is having a torrid time against the South Africans, England’s women crashed into the World Cup Final with a 4 from the penultimate ball of the game against South Africa’s women. I love a tense finish, but that was a little too nail biting. Fab work ladies! Anya Shrubsole has nerves of steel.
 

Quote


“If lightning is the anger of the gods, then the gods are concerned mostly about trees.”

Lao Tzu 

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