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October 2016

Big week for UK data may boost Pound

Published: Monday 17 October 2016

  • Big week for UK data may boost Pound
  • NZ and Aussie central banks in the news  
European Council member Donald Tusk has apparently been put forward as the devil’s advocate when it comes to Brexit. His hard line comments are designed to show the EU acting tough with Britain and to some degree, that is what they need to be seen to do. If it is easy to leave the EU, many more might join the UK as we seek asylum within our own borders.
I doubt his comments have much to do with Sterling’s deterioration, but the Pound remains the wimpy kid of the forex markets right now. You can argue that it was overvalued before and that this is an inevitable correction, but it will have consequences. The inflation data later this week is probably too early to show much of the weakness of the Pound and the impact it has on fuel and import costs but there will be some effect in the numbers. Hence we expect the Consumer Price Index (CPI) to have risen and that will add some strength to the Pound. This week also brings a slew of other UK data, including Employment, Government Borrowing and Retail Sales. The forecasts are for higher inflation, fairly buoyant Retail Sales, level unemployment and a fall in Government Borrowing. That ought to boost the sad looking Pound.
This week also brings a smattering of EU data, including a bit of Construction Data and the European Central Bank’s (ECB) interest rate announcement. We are not expecting any change from the ECB, but Thursday’s press conference will be watching with eagle eyes, trying to determine what on earth they can do to get some life back into the EU. As with the UK, Brexit and all its ramifications have knocked the EU economy, but the Euro is remarkably robust in spite of that. How long that will last as Brexit talks get underway is anybody’s guess.
As far as the Antipodes are concerned, we start with New Zealand data tonight and that is expected to have dropped to virtually no change. The immensely strong NZD might dip on that news because, whilst the Reserve Bank of New Zealand (RBNZ) seems keen to leave the base rate on hold, they may not be able to do so if NZ data deteriorates.
Tomorrow brings the release of the minutes from the last reserve Bank of Australia (RBA) meeting and that will be interesting. Their currency could really do with a rate cut to weaken it off, but the RBA has resisted that urge. I suspect they will remain pat if Thursday’s employment data is as buoyant as the markets have forecast.
This Friday brings Canadian Retail Sales and Inflation data. A dip in sales and persistent deflation are the problems for Canada but the Canadian Dollar, especially against the Pound, is looking very healthy indeed; buoyed by a rise in energy prices and the booming US Dollar.
And, if the US presidential election has driven you mad enough, you can rent a tank and drive over a model of either Donald Trump or Hilary Clinton. A company called Drive A Tank, located in Kasola, Minnesota, will load the dummy of your choice (and I mean a mannequin) into a car and let you drive one of their tanks over the vehicle and probably back again and over again if the first pass doesn’t sate your need to do damage to a politician.

Give me a reason

The head of the Alien fleet was meeting the head of the United Nations to try to decide whether or not to demolish Planet Earth.

“Why should I save your planet?” said Throg from the Planet Zxnymian-Sprinjezx

“Because we are an advanced species and we can live together with you in peace,” said Ban Ki-moon.

“You can’t even live together as humans,” said Throg. “You’ve destroyed countless species and you have wars in several parts of the planet as we speak. That’s not true and it’s not a reason to save you. Show me how advanced you are. How do you power your transportation devices?”

“We burn old plants and dinosaurs,” said Mr Ban Ki-moon

Throg laughed and left the room.


Today's Major Economic Releases 

Market BST Data/Event Previous Expected
EUR 10:00 EU: Final Consumer Price Index (CPI) 0.4% 0.4%
EUR 10:00 EU: Final Core Consumer Price Index (CPI) 0.8% 0.8%
CAD 13:30 Canada: Foreign Securities Purchases 5.23b 6.24b
USD 13:30 US: Empire State Manufacturing Index -2.0 1.1
USD 14:15 US: Capacity Utilization Rate 75.5% 75.6%
USD 14:15 US: Industrial Production month-on-month -0.4% 0.3%
GBP 15:45 MPC Member Broadbent speaks    
USD 17:15 FOMC Member Fischer speaks    
USD 18:35 ECB President Draghi speaks    
NZD 22:45 New Zealand: Consumer Price Index (CPI) 0.4% 0.0%

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Daily Currency Analysis by David Johnson

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