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November 2017

Sterling slips on slack wage growth

Published: Thursday 16 November 2017

  • Sterling slips on slack wage growth
  • USD hit by tax reform problem
  • South African Rand knocked by Zimbabwe changes
By Charlie Horsley

Sterling slipped to a four-week low against the Euro on Wednesday. Average wages growth still lags consumer inflation and that does nothing to alter the perception that the Bank of England will keep interest rates on hold for an extended period following their November rate hike; the first in a decade. Investors are also keeping a close eye on Brexit developments. Prime Minister Theresa May’s blueprint to leave the European Union emerged unscathed on Tuesday from a first day of debate in parliament on legislation to sever ties with the bloc. Sterling hasn’t collapsed though; levels around €1.11 and US$1.31 are reasonably stable and there is as much evidence to support a rise in Sterling’s value as there is to see it fall. Half decent Retail Sales figures today might steady the boat but the forecasts are pretty poor. Sterling may be in for a rough Thursday.
The US Dollar was on the defensive on Thursday, as doubts for the prospects of US tax reforms, a fall in US stocks, and declining high-yield bond prices all soured the mood. These overshadowed an uptick in underlying US inflation. The long-discussed US tax reform bill drew fire from two Republican lawmakers on Wednesday in a possible sign of trouble for the sweeping measure, given the party can afford to lose no more than two votes if they are to succeed in passing the legislation.
Elsewhere the upheaval in Zimbabwe is being seen as bad news for South Africa. Zimbabwe remains South Africa’s biggest trading partner so increased uncertainty and turmoil will negatively impact the South African economy and thus the Rand is at its weakest level against the Pound since September 2016. That’s a great buying opportunity for those who need Rand.
Data-wise, Australian employment figures were reasonably good this morning but have not really affected the GBP AUD Rate. Later this morning we have European Consumer inflation and Bank of England Governor, Mark Carney will also be speaking this afternoon.
And, as a monumental moment in history, you can’t beat what happened on this day in 1990. Having not sung or performed a note in their album, ‘Girl you know it’s true’, Milli Vanilli were stripped of their Grammy award. I know….it’s so sad. Still got their poster though.
The Blacksmith
“So why exactly did the blacksmith die?” asked the detective.
“Well,” said the young blacksmith’s apprentice. “It’s his own fault. He kept shouting at me about following his orders exactly.” There followed a long pause.
“Aaaand….?” Said the Detective.
“Well he said, ‘hit the nail’ and I punched it and he shouted because I should have used a hammer. He hadn’t said anything about a hammer at the time.”
“I am not following you,” said the detective.
“Well I got a hammer and he held the nail out but he wasn’t specific.”
“About what?” asked the detective.
“Well he didn’t mention the nail. He just put the nail in the slot and then he said, ‘when I nod my head, hit it’.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Retail Sales -0.8% 0.1%
EUR 10:00 EU: Final Consumer Price Index 1.4% 1.4%
EUR 10:00 EU: Final Core Consumer Price Index 0.9% 0.9%
CAD 13:30 Canada: ADP Non-Farm Employment Change 1 -1
CAD 13:30 Canada: Foreign Securities Purchases 9.85b 10.68b
CAD 13:30 Canada: Manufacturing Sales 1.6% -0.4%
USD 13:30 US: Unemployment Claims 239k 235k
USD 13:30 US: Import Prices 0.7% 0.4%
USD 13:30 US: Philly Fed Manufacturing Index 27.9 24.5
USD 14:15 US: Capacity Utilization Rate 76.0% 76.3%
USD 14:15 US: Industrial Production 0.3% 0.5%
NZD 21:30 New Zealand: Business Manufacturing Index 57.5 57.5
NZD 21:45 New Zealand: Producer Price Index Input 1.4% 1.2%

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