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October 2016

UK Gross Domestic Product awaited

Published: Monday 24 October 2016

  • UK GDP awaited
  • Central bankers in the news
  • Brexit negotiations start in earnest 
Loved the dig the French contingent put in over Brexit negotiations. They asserted that, as Britain was leaving the EU, negotiations should be conducted in French. Why French and not German? And why French and not Spanish? I love a bit of brinkmanship. Oh that roughly translates as either ‘corde raide’ or ‘politique du tout pour le tout’ or ‘stratégie du bord de l'abîme’. Maybe that’s why the EU chooses English...?
 
Sterling starts this week a little less battered compared to the two previous weeks. Work is getting underway to negotiate the relationship between the UK and EU in the post-Brexit era. The nature of that relationship is the key and traders will twitch and buy and sell and go all ‘headless-chicken’ on us from time to time. That is the nature of a market with millions of participants, mostly speculators, trading an average of $5.3 trillion a day. 
 
This week brings the first draft of the UK’s Quarter Three economic growth. The forecasters believe it will show a similar figure to Quarter Two at roughly 2.0% annualised growth. Not bad for an economy that was forecast to crash if Britain voted to leave EU is it. Let’s hope the forecasters have got new batteries in their calculators and we don’t get a nasty surprise on Thursday.
 
This week also brings a melee of central bank intervention. Speeches by numerous Federal Reserve chair people, as well as testimony from the Bank of England Governor and the Head of the Brexit Ministry. The market always becomes more volatile when opinions of influential people are involved because the interpretation of those opinions is always open to, well, opinions. Hence the confusion. 

 
We will also get inflation data from Australia and business and Consumer Confidence Indices (CCI) from Germany, Italy and the US.
 
And it is Labour Day in New Zealand, so please don’t be surprised if payments to NZ banks are delayed by a day. The big data for the NZ Dollar this week is the trade balance, due for release on Thursday (NZ time). A slight narrowing of the trade deficit is expected and that would add further weight to the argument that NZ interest rates do not need to decline any further.
 
In essence, there is a lot of news to be ready for this week and plenty of opportunity for unexpected market shocks. Preparation and risk management for your positions are only a phone call away.
 

Same school

 
I was sitting in the waiting room for my first appointment with a new dentist. I noticed his dental diploma. Suddenly, I remembered a tall, handsome, dark haired boy with the same name had been in my secondary school class some 30-odd years ago.

Could he be the same guy that I had a secret crush on, way back then? On seeing him, however, I quickly discarded any such thought. This balding, grey haired man with the weather beaten face was far too old to have been my classmate.

After he examined my teeth, I asked him if he had attended Morgan Park secondary school.

“Yes, yes I did. I'm a "Morgan-boy," he beamed with pride.

“When did you leave to go to college?” I asked

He answered, “In 1965. Why do you ask?”

“You were in my class!” I exclaimed.

He looked at me closely, and then this ugly, old, bald, wrinkled, grey haired, decrepit, man asked...

“What did you teach?”
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
EUR 09:00 EU: Flash Manufacturing Purchasing Managers' Index 52.6 52.7
EUR 09:00 EU: Flash Service PMI Purchasing Managers' Index 52.4 52.2
GBP 11:00 UK: CBI Industrial Order Expectations -5 -2
CAD 13:30 Canada: Wholesales Sales month-on-month 0.3% 0.2%
USD 14:00 FOMC Member Dudley speaks    
USD 14:05 FOMC Member Bullard speaks    
USD 14:45 US: Flash Manufacturing PMI 51.5 51.6
CAD 20:30 BOC Gov Poloz speaks    


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Daily Currency Analysis by David Johnson

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