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October 2016

Sterling bounces on higher inflation

Published: Wednesday 19 October 2016

  • Sterling bounces on higher inflation
  • Unemployment in UK should show decline
  • Bank of Canada likely on hold
UK inflation rose to 1.0% in the year to September and the crowd went wild. Sterling bounced from its oversold position and profits were taken by those who had been forcing Sterling lower. Brexit is still in the background, the weaker Pound hasn’t really registered in the figures yet and all is not yet rosy in the garden for Sterling but this was a little bit of respite. All eyes turn to the unemployment data this morning. I doubt we will see any change in the 4.9% unemployment rate, but a few more jobs are likely to have been added. If so, Sterling may well make more gains, or maybe it is more appropriate to say the pound could recover some of its recent losses. Either way, it could be another nail in the coffin of the argument that Britain is near death’s door. Perhaps if its politicians would allow the data to tell its own story, the UK economy would be allowed to strengthen in spite of them. 
 
Overnight news showed that China’s economy is growing at 6.7% but Chinese data is so shrouded in mystery that anything could be true and we would be none the wiser. Hence, markets kind of ignored that news. 
 
This afternoon brings a smattering of US housing market data, which will influence the Federal Reserve somewhat, but is unlikely to overrule the other things influencing the US Dollar at the moment. Its status as a safe haven, the robustness of other parts of the economy and America’s economic strength relative to the melee going on elsewhere, to name but a few.
 
This afternoon also brings the Bank of Canada’s interest rate decision. No change is expected, but the tone of the statement accompanying the decision will be interesting, The Canadian Dollar is benefitting from rising commodity prices and the strength of its neighbour and main export customer, the USA. However, that has not yet shown in the domestic data and the threat to the trade agreement with the EU is a concern, but I doubt it will significantly damage the Canadian Dollar. 
 
And there is renewed hope for all of us. I think I could pass for a 25-year old after seeing the “Children” being admitted to the UK from the Calais camp. None of those I saw would have been ID checked if they bought alcohol or turned up at a nightclub. I am not quite sure who is conning whom, but what a nonsense!
 

Age quotes

 
Ageing gracefully is like the nice way of saying you're slowly looking worse.
 
I chose not to colour my hair thinking it would make people think of me as a "Distinguished Gentleman.” Oddly, what it does is get people to say in a very loud voice, “Do you know we do a senior citizen discount?”
 
You know you’re getting old when a teenager asks, “Did they have those in the old days?”
 
When I was young I did stupid things because I didn't know any better. Now I know better but I do stupid things because I miss being young.
 
It’s true that wine improves with age. The older I get, the more I like it.
 
You know you’re getting old when you browse an antique store and find yourself saying, “I used to have one of these”.

 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
GBP 09:30 UK: Average Earnings Index 2.3% 2.3%
GBP 09:30 UK: Claimant Count Change 2.4% 3.4%
GBP 09:30 UK: Unemployment Rate 4.9% 4.9%
USD 13:30 US: Building Permits 1.14m 1.17m
USD 13:30 US: Housing starts 1.14m 1.18m
CAD 15:00 BoC Monetary Policy report    
CAD 15:00 BoC Rate statement    
CAD 15:00 BoC Overnight Rate 0.50% 0.50%
CAD 16:15 BoC Press conference    
USD 19:00 Beige book    


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Daily Currency Analysis by David Johnson

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