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November 2016

Sterling remains supported ahead of Autumn Statement

Published: Wednesday 23 November 2016

  • Sterling remains supported ahead of Autumn Statement
  • Italian referendum has shaken the EU
  • US Federal Reserve minutes due this evening
  • Volatility likely in two day US holiday.

It is Chancellor Philip Hammond’s big day; his first Autumn Statement and his opportunity to show how different he is to his predecessor, George Osborne. I have no doubt he would like to stamp his mark of authority on the UK economy, but the question is whether he has enough financial wriggle room to be able to do anything substantial. In fact, a large part of his speech has already been laid out for the press, so the chance of huge surprises may well have passed. Sterling remains rather well supported, but is below the highs we saw on Monday.
 
The Euro remains weakened by the upcoming Italian constitutional referendum. 5th December will be the day on which we will know whether Italy may be on a path to exit the Euro and that – along with Brexit and hints of an anti-EU movement in the Netherlands – is not what the EU leaders want to see. This morning brings manufacturing and service sector data releases and the forecasts are mixed for these, so we may have Euro volatility through the morning.
 
This afternoon brings US durable goods order data and the consumer sentiment index from the university of Michigan. No real excitement is expected from these releases, but later this evening, we will get the minutes from the last Federal Reserve Open Market Committee meeting. Will they or won’t they hike the US base interest rate when they meet in December? I am asking because there is no real consensus on that. I suspect they will hold fire for now and the US Dollar, which has been demonically strong of late, is likely to weaken a little if they do so. The US Dollar markets are quiet ahead of the Federal Reserve minutes, as are gold and most commodities.
 
Once the Federal Reserve minutes have been released, there will be a flurry of activity in the US before traders scoot off to celebrate Thanksgiving and consume copious amounts of turkey. Tomorrow’s public holiday in America will be followed by the dreaded Black Friday shopping binge; something retailers in the UK have bought into on a wholesale basis. Any excuse, I guess. It does mean that the financial markets will be devoid of US traders for a couple of days; and those thinly traded markets can prompt increased volatility. So, automated orders are the best friend to anyone with a short/medium term need.
 
And here’s a story that makes perfect sense – to animal lovers at least. An Australian hospital has seen childrens’ recovery times improve by up to 30% through a new therapy. They bring dogs into the wards to cheer the kids up and it works. Patients who asked to see the dogs were, on average, discharged 30% faster than those who declined. Anyone who has ever owned a dog will just be nodding and smiling in a ‘knowing’ way right now.
 

In the pub

 
A Chinese guy walks into a pub, sits down and starts sipping a pint. The guy next to him says, “Hey, do you know any karate, ju-jitsu, aikido…any of that kind of stuff?”
 
“That’s a bit racist”. Says the Chinese guy.  It’s typical that you would assume that, because I look Chinese that I’m bound to do some kind of martial arts. WELL NO I DON’T! You are a racist, or why would you ask me a question like that?”
 
“Well, I asked,” says the guy, “because you’re drinking my beer.” 

  

Today's Major Economic Releases
 

 
Market BST Data/Event Previous Expected
GBP 12:30 UK: Autumn Forecast Statement    
USD 13:30 US: Core Durable Goods Orders 0.1% 0.2%
USD 13:30 US: Unemployment Claims 235k 241k
USD 13:30 US: Durable Goods Orders -0.3% 1.2%
USD 15:00 US: New Home Sales 593k 591k
USD 15:30 US: Crude Oil Inventories 5.3m 0.3m
USD 19:00 Federal Open Market Committee Meeting Minutes    
 
Daily Currency Analysis by David Johnson

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