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November 2017

Sterling holds up well ahead of Budget statement

Published: Wednesday 22 November 2017

  • Sterling holds up well ahead of Budget statement
  • US Dollar weaker on a number of factors
  • US Federal Reserve Chair doubts inflationary risks
  • Poor New Zealand Retail Sales forecast
By David Johnson
US Dollar weak on inflation uncertainty
The US Dollar remains weak after Federal Reserve Chair (for now) Janet Yellen expressed uncertainty over whether US inflation would rebound to 2.0%. That it, she believes the threat is limited and therefore the threat of higher US interest rate is diminished. USD weakness was also helped by a cut in crude oil being pumped from Canada to the US. That has lifted the price of crude oil and a stronger commodity market tends to weaken the currency in which commodities are traded; the USD.
Sterling steady before Budget
Sterling is holding its ground after Brexit Minister and walking alliteration, David Davis, suggested a deal with the EU was a long way away. Negotiators always say this kind of thing mid-way through talks. It is the stuff of negotiation. But Sterling is also poised to react to the Chancellor of the Exchequer’s Budget, which is due to be delivered today. All the newspapers know what Philip Hammond is going to say, but they don’t all agree, so someone is wrong.  Anyway, the focus will be on how long he speaks for, what he drinks and periphery like that. Ultimately, the Chancellor doesn’t have a lot of room to manoeuvre, so tinkering is likely and that tinkering seems set to shift the tax burden from the young to the old. We shall see. Whatever the statement contains, I suspect little of it will impact the Pound other than that getting it out of the way should allow the Pound to resume its strengthening path.
Little economic data expected today, but some key info for the US
The morning looks to be a quiet one, with little data of note. This afternoon will be more exciting. Once the Budget is out of the way, the US Federal Reserve publishes the minutes to the last Open Market Committee meeting and we’ll get Durable Goods Orders; a bellwether for business confidence. Having said that, the data is expected to show a lack of confidence, so USD weakness may well continue.
New Zealand anticipates poor retail sales results
Overnight tonight we will get New Zealand retail sales data and the forecast for that is very poor. The consensus is growth of just 0.1%, when the Q2 figure was 1.9%. If so, the NZD is likely to weaken on the news – and that may just be a knee jerk dip ahead of, or just after, the announcement. This is the perfect opportunity for automated orders to capture the best of that volatility while Northern Hemisphere clients are asleep.
A day of great change…
And on this day in 1963, in Dallas, Texas, US President John F. Kennedy was shot whilst on a processional drive through the city. And thus the hobby of conspiracy theories was born. That day really did change things. Also, quite apart from the changes to US security arrangements and an uplift in paranoia, up until that moment, no one knew what a grassy knoll was and few had ever heard of a book repository.

A staunch feminist is getting on a bus when a man ahead of her starts to rise from his seat. She thinks to herself, "Here's another arrogant man trying to keep up the customs of a patriarchal society by offering a poor, frail woman his seat," and she pushes him back onto the seat saying, “don’t even think about it”.

The guy is bemused, but a few minutes later, he tries to get up again. She is insulted again and tuts loudly as she refuses to let him up.

Finally, the man says, "I don’t know what your problem is but, thanks to you, I am now two stops past my office."