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November 2017

Sterling bounces back on service sector data

Published: Monday 06 November 2017

  • Sterling bounces back on service sector data
  • Euro gets a boost from German data
  • Aussie interest rates likely on hold
By David Johnson
 
 
Sterling bounces back a bit
 
Sterling, which was hammered after the Bank of England (BoE) forecast of just 50 basis points more of hikes in the next three years, bounced back on Friday. The UK service sector produced its strongest Purchasing Managers’ Index (PMI) result for six months and that follows improvements elsewhere. UK data keeps defying the naysayers and the Pound bounces back like a bowling ball on a trampoline. Part of the rebound may be to do with comments from the BoE Governor, who suggested that the BoE would have little room to lower rates if the Brexit negotiations ended with no deal. The threat of inflation may well be too great.
 
Eurozone data could strengthen Euro
 
This morning we have already had German factory orders data, which was much stronger than expectations at +1% month on month. The markets had forecast a one percent decline. We will get service sector purchasing managers indices from Germany and the Eurozone as a whole this morning. So there is room for Euro volatility and, if the forecasters are right on this data, that should cause Euro strength.
 
Australian interest rate decision overnight
 
The rest of Monday is pretty quiet in the European and American markets. Overnight tonight we get the Australian interest rate decision, but no one is expecting the Reserve Bank of Australia to change the base rate at the moment. They are caught between heaps of conflicting data and would find it just peachy keen if the housing market would slow, inflation would remain under control and the Aussie Dollar would weaken further without them needing to change the base rate. There is still a possibility they will have to cut the base rate again before this cycle is over.
 
Paradise Lost?
 
And a story to watch is the massive leak from a law firm in Bermuda, dubbed the Paradise Papers. One of the early findings is that The US President’s Commerce Secretary, Wilbur Ross, is in business with the Russian President’s son in law and a number of other Russians in a venture called Navigator Holdings. Secretary Ross made a big play of telling the world he was exiting some of his investments so he had no conflicts of interest but maybe that isn’t entirely true. Mind you, apparently the Queen and Bono also had funds in offshore accounts. So maybe it’s fine then, or maybe that’s bad too.
 
Decorating instructions
 
A woman gets a call while she is at work. “Hello, is that Mrs. Ambrose?” says the voice.
“Yes,” she says, with some suspicion.
“This is nurse Franks at the A&E department. Your husband is here but, before you worry, he will be fine. Could you come down and collect him please?”
“Of course,” she says. “I’ll be there in ten minutes.”
When she arrives at the hospital, she discovers her husband has been brought in with heat exhaustion and severe dehydration.
“I walk out the door leaving you decorating the hallway and the next thing is you are in A&E with heat exhaustion. What happened, Mike?” she says angrily.
The nurse, in an attempt to diffuse the situation, says, “He was found by your neighbour collapsed on the door step. What is surprising, and the reason he has heatstroke, is that on a warm summer day, he was wearing a puffa jacket and a padded parka at the same time.”
“Are you mad, Mike? What the hell were you thinking?” said the wife.
“It’s not my fault,” Mike said feebly. “I was just trying to do a good job and the paint tin said, ‘Two coats will give the best results.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR All Day Eurogroup Meetings    
EUR 09:00 EU: Final Services Purchasing Managers' Index   54.9 54.9
EUR 10:00 EU: Producer Price Index 0.3% 0.4%
CAD 15:00 Canada: Ivey Purchasing Managers' Index 59.6 60.2
USD 17:00 Federal Open Market Committee Member Dudley Speaks    

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