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November 2015

Daily Currency Insight

Published: Friday 06 November 2015



I hope your fireworks night wasn't a complete washout last night. On my journey home, I was just amazed at how many firework event visitors can't park their cars to save their lives. I couldn't count the number of blocked roads where cars had been abandoned on any piece of empty space. The South of London into Sussex was almost gridlocked in places. I just hope it was worth it.
 
I could talk about the fireworks in the currency market yesterday but that would be too cheesy wouldn't it. Nope, you'll get no damp squib jokes from me; no mentions of sparklers or rates spinning like Catherine wheels. No Sir-ee. The Pound stalled and corrected and retraced and all those other euphemisms for weakening yesterday. The reason was the Bank of England's more considered tone in their minutes and in the inflation report. The vote to leave the base rate on hold at 0.5% was 8-1 and that was no surprise. However, their inflation report downgraded the forecasts and they made it clear we would need to see really solid reasons for a rate hike. That put, the expectation of an early rate rise on hold and I suspect we will see nothing from the BoE on that front until late 2016. The Pound rocketed lower (sorry everyone, couldn't resist it). It dropped back below €1.40 and fell into the $1.51 zone against the US Dollar. It also dropped below C$2.00 and slipped against everything else.  Sterling may be in for more pain today is the industrial output data is softer than last month as the forecasts would suggest.
 
On the US front, the Dollar is in good form as we anticipate today's US employment report for October. Positive news is expected and, after last month's disappointing 142,000 fresh jobs, we expect something above 175,000 this month. If that is so, having broken below the $1.53 support against the Pound, we could see the USD test $1.50 very easily. Beware if your are a Dollar buyer and rejoice if you are a seller.
 
After such a poor showing in the past few weeks, it was interesting to see the Euro make gains against the Pound but a quick glance at the Euro-US Dollar rate shows that this is almost solely a Sterling effect. The Euro-USD rate stabilised but very definitely didn't reverse yesterday. After falling 1.3 cents the previous day, this exchange rate fell another 30 pips on the day (roughly a third of a cent) and has only gained a few ticks this morning. This morning's poor German factory orders haven't helped the beleaguered shared currency and, as mentioned above, the US data this afternoon is as strong as analysts expect, we should see further declines in the Euro-USD rate and perhaps a recovery of the Pound against the Euro as well.
 
We will also get Canadian employment data this afternoon. The Canadian Dollar gained against the pummelled Pound yesterday. We suspect the unemployment rate will stay at 7.1%; it's still high and it isn't what the Canadian authorities would like to see but it would show a bit of stability and that is fine for now. As the CAD is below C$2 to the pound, it could slip to the C$1.99 level and that would still leave it in an uptrend. However, if the rate drops below there, the shorter term downward trend is in place and C$ 1.95 is a distinct possibility.
 
In an apparently unashamed publicity stunt, Tesco in Wrexham is advertising a job for a Christmas Tree Light Untangler.  So, (I am quoting from the advert now) if you have a passion for Christmas, can untangle 3 meters of lights in 3 minutes and ae approachable, get yourself down to Tesco's job site and move to Wrexham.
 
Have great weekend.
 

The Don

 
A Mafia Godfather, accompanied by his 2nd in command, walks into a room to meet with his former accountant. The Godfather asks the accountant, "Where is the 3 million bucks you embezzled from me?" The accountant does not answer. The Godfather asks again, "Where is the 3 million bucks you embezzled from me?" The 2nd in command, Vito, interrupts, "Don Gardini, the man is a deaf mute and cannot understand you, but my sister is deaf and I can use sign language. I can interpret for you." The Don says, "Thank you Vito. Ask him where my damn money is!" Vito, using sign language, asks the accountant where the 3 million dollars is. The accountant signs back, "I don't know what you are talking about." Vito interprets to the Don, "He doesn't know what you are talking about." Don Gardini pulls out a 9 millimetre pistol, puts it to the temple of the accountant, cocks the trigger and says, "Ask him again where my damn money is!" Vito signs to the accountant, "He wants to know where it is!" The accountant signs back, "OK! OK! OK! The money is hidden in a brown suitcase behind the shed in my backyard! Just tell him not to kill me." The Don says, "Well....what did he say?" Vito shakes his head. "He says something very rude about your mother that I cannot say to you my Godfather and he says you don't have the guts to pull the trigger".