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October 2017

Sterling falls on disappointing retail sales data

Published: Thursday 19 October 2017

  • Sterling falls on disappointing retail sales data
  • China reports a 6.8% Gross Domestic Product (GDP) growth
  • Spain confirms implementation of Article 155 to suspend Catalonia's autonomy 
By Ricky Nelson
Overnight in Australia it was reported that employment rose by 19,800 last month and that the unemployment level fell to 5.5%, down 5.6%, which is a five-year low. Strangely, the Australian Dollar failed to move on the news, but the bias is certainly set for a rally from here.

We had a raft of data released from Asia. Chinese Gross Domestic Product (GDP) grew 6.8% year-on-year in the third quarter and retail sales a healthy 10.3% year-on-year in September. These were mostly as expected and although this is good news for President Xi in the midst of the party congress, markets were unmoved.

Sterling fell yesterday despite positive UK data. Wage growth was reported at 2.1%; marginally higher than the 2% expected. Pay is still lagging behind inflation, though, and this will put even more pressure on the Bank of England not to raise interest rates next month. Sterling has failed to rally in a meaningful way as Brexit concerns continue to weigh on the Pound. Today, UK Prime Minister Theresa May is expected to reassure EU nationals already living in the UK that she will make is as easy as possible for them to remain post-Brexit. Lower than expected retail sales figures released this morning have weighed even further on the Pound, which will continue to take its cue from any rhetoric around the progress of Brexit talks. The Pound has so far fallen to an intraday low on the retail sales news.

Spain has confirmed it is taking steps to suspend Catalonia’s autonomy this morning, invoking Article 155, which means taking direct control of the region. Any further unrest leading to the violent scenes seen earlier this month could see the Euro take a hit, although it has strengthened initially on the news.
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Long Journey
A couple had been arguing during a long journey. It started with map reading disagreements and escalated from there. As they drove along a country road, 30 minutes had passed since either of them had spoken and the air was thick with resentment. Neither of them wanted to give in first. As they passed a small farm, there were several pigs wandering around a small paddock.
In a voice heavy with sarcasm and with a wry smile, the wife said, "Relatives of yours?"
The husband sighed as he replied, “Yup….In-laws."

Today's major economic releases

Market BST Data/Event Previous Expected
EUR 09:10 European Central Bank President Draghi Speaks    
GBP 09:30 UK: Average Earnings Index 2.1% 2.1%
GBP 09:30 UK: Claimant Count Change -2.8k 1.3k
GBP 09:30 UK: Unemployment Rate 4.3% 4.3%
CAD 13:30 Canada: Manufacturing Sales -2.6% -0.2%
USD 13:30 US: Building Permits 1.27m 1.25m
USD 13:30 US: Housing Starts 1.18m 1.18m
USD 15:30 US: Crude Oil Inventories -2.7m -4.7m
USD 19:00 US: Beige Book