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November 2017

Sterling starts the week lower

Published: Monday 13 November 2017

  • Sterling starts the week lower
  • National Institute of Economic and Social Research estimated UK Gross Domestic Product growth of 0.5%
By Mike Mistretta

Last week was rather quiet in the FX market, with little volatility. The US tax plan was one of the main market movers as the dollar ended the week lower as traders were clearly dissatisfied with the Senate's version of the plan, which would delay corporate tax cuts by a year. One of the only important releases of data last week surprised on the upside as the UK manufacturing output increased 0.7% over the month and 2.7% over the year in September. Adding to the positive landscape was UK Gross Domestic Product (GDP) estimate from National Institute of Economic and Social Research (NIESR) that estimated growth rising 0.5% in three months ending in October, up from 0.4% in September. Unlike the European Commission’s forecast, NIESR said it sees the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth. The long-term economic forecast for the UK is less rosy, with the European Commission cutting the growth rate outlook for the UK in 2018 and 2019, while raising the outlook for rest of Europe. 
Sterling starts the week lower, though, as another political storm threatens to engulf the Conservative party. Prime Minister Theresa May's position is becoming more precarious, as more MPs are getting impatient with her. It is reported that up to 40 Conservative MPs are ready to challenge May's leadership by signing a letter of no confidence. If eight more MPs are going to join, the letter would trigger a vote of no confidence, which could eventually lead to a leadership contest. The Pound has fallen over 1% on the news.
There is little data of note due to be released today, however, the rest of the week we have a full data set. On Tuesday we have UK inflation, with markets expecting Consumer Price Inflation (CPI) to rise 0.2% month-on-month, while rising 3.1% over the year in October. Inflation, which the Bank of England cited as the reason to raise interest rates this month, is expected to accelerate further from September, but possibly peaking as the effect of Sterling’s past depreciation feeding into prices starts to dissipate.
On Wednesday, the Office for National Statistics (ONS) releases its labour market report, with unemployment expected to keep around the 40-year low of 4.3%, while closely watched wage growth is seen decelerating further and rising only by 2.0% over the year.
Thursday’s retail sales report should see sales unchanged in October from the previous month after falling 0.8% month-on-month in September. On Thursday, policymakers from the Bank of England including Governor Carney and Deputy Governor Broadbent are speaking in Liverpool.
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Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD All Day Canada: Bank Holiday    
USD 19:00 US: Federal Budget Balance 8.0b -58.2b
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