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October 2017

Sterling pops up on EU concession rumours

Published: Friday 13 October 2017

  • Sterling pops up on EU concession rumours
  • USD weaker on oil price rise
By David Johnson
US inventories of energy stocks fell last month, pointing to a tighter market - aided and abetted by OPEC pressing for production cuts - and that boosted the price of crude oil. One of the consequences of that is a weaker US Dollar. The Dollar will also have been hit by a drop in healthcare shares after the Trump administration cut payments to insurers that sell Obamacare products. They couldn’t get changes into law so they are making change by the back door. How very Trump-like.
Chinese data overnight showed a sharp rise in Imports and exports. Imports were up 18.7% in September; way above the 13.5% forecast. Exports were up by just 8.1% and that fell short of the lofty 8.8% forecast but was still the best level in 3 months. This is a boost for countries that service China’s mega economy. So there was some strength for the Aussie and Kiwi Dollars as well as the Yen and others.
Sterling had a good Thursday. The Pound stumbled in early trade after the chief EU negotiator said the Brexit bill discussions had reached stalemate but rumours were also spreading that the EU would offer a 2 year transition arrangement to the UK and that was perceived as positive for the UK economy. The Pound has stayed with that good form this morning and is already above €1.12 and $1.3250. There is little in the way of UK data today, so we may see the top of those ranges this morning before the pound consolidates.
This afternoon is all about the USA. Retail and inflation data is expected to be rather upbeat but the USD may not react with strength because there are so many other factors pushing it the other way. That said, inflation above 2.3% and/or retail spending rising by 2% or more, could well strengthen the USD in the short term at least. Volatility is the likely outcome.
We will get details from a meeting of the International Monetary Fund over the weekend and a speech from Janet Yellen, the head of the US Federal Reserve. So there is scope for volatility before we open the doors on Monday and we will also have some UK housing market data before then. Next week is also awash with consumer inflation data. So all these central banks that are umming and ahhing about whether to raise their base rates, cut their QE budgets etc, will have some insight into whether they would kill the economy by doing so or have room to manoeuvre. Hence it will be a busy week.  
And, to all the friggatriskaidekaphobics out there, you need not fear Friday 13th. Insurance companies see Monday 27th as far more likely for insurance claims. In America, July 1st marks the start of the new medical interns session, so getting sick then is perhaps more touch and go. And one site that promotes infidelity says they get massive rises in new members on the days after Mother’s Day and St Valentine’s Day. There are no statistics that point to Friday 13th being unlucky. So you should be absolutely fine…unless you are just unlucky I guess.
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Quote for the day
“When it comes to plastic surgery and sushi, never be attracted by a bargain”.
Graham Norton

Today's major economic releases

Market BST Data/Event Previous Expected
ALL All Day International Monetary Fund Meetings    
USD 13:30 US: Consumer Price Index 0.4% 0.6%
USD 13:30 US: Core Consumer Price Index 0.2% 0.2%
USD 13:30 US: Retail Sales -0.2% 1.7%
USD 13:30 US: Core Retail Sales 0.9% 0.2%
GBP 14:30 UK: Conference Board Leading Index -0.1% -0.1%
USD 15:00 US: University of Michigan Consumer Sentiment 95.1 95.1

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news