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October 2017

Sterling slips as politics and economics take their toll

Published: Monday 02 October 2017

  • Sterling slips as politics and economics take their toll
  • US Dollar rebounds on Federal Reserve rate hike talk
  • China’s manufacturing improvement boosts commodity markets
  • Strong manufacturing results from EU and UK this morning and US later today
By David Johnson
What an extraordinary weekend of news. Seeing images of the Spanish riot police beating people up because they want democracy was vile and yet the EU seems to have become mute on the subject. Stabbings in Marseilles, a gun attack in Las Vegas, protesters outside the Conservative conference demanding hangings, a massive gun image falling on Marilyn Manson – violence is all over the news. In the meantime, hundreds of thousands of people are being affected by the failure of Monarch airlines, which means there may be pilots looking for jobs – and that could save Ryanair’s skin.
The financial markets were obviously impacted by the Monarch news, but that wouldn’t directly affect exchange rates. Sterling though, slipped in the latter part of last week as growth data downgrades sank in and rumours circulated that Prime Minister Theresa May is under increased pressure to cede power to a new party leader.
The US Dollar strengthened as a member of the Federal Reserve signalled an interest rate hike in December and the USD was also boosted by a minor decline in the Euro following the state sponsored violence against voters and the 90% in favour of independence outcome at the Catalan referendum in Spain. The independence leaders are calling for unilateral independence as soon as this week and that will unsettle an EU that doesn’t seem to know what to say about the situation.
News over the weekend that China’s manufacturing sector is improving has added a little strength to currencies affected by raw materials. Those include the Canadian Dollar and Australasian Dollars. Ironically, we also saw a sharp drop in Australian manufacturing confidence; from an index reading of 59.8 to just 54.2. That is still expansionary, but a little cooler. However, the rebound in the USD weakened the Aussie and Kiwi Dollars, so the movement in these currencies was muted. The Reserve Bank of Australia meets tomorrow to set the base rate. No change is forecast to the current 1.5% level.
Today’s data releases includes manufacturing sector Purchasing Managers’ Indices (PMI) from the Eurozone, UK and US. All are important in their own way. 
The UK has seen continued growth in the latest figures for the manufacturing sector, with a headline reading of 55.9 in September 2017, thanks to increasing production and new orders, although concerns over inflationary pressures have once again come to the fore.
The Eurozone manufacturing sector has seen even stronger growth again this month, increasing jobs in the sector to record highs and posting a healthy overall figure of 58.1 for September. Manufacturing in the Eurozone is now performing at its best for coming up to seven years.
We will also get the Eurozone unemployment figures today; and there is an outside chance of a drop from 9.1% to 9.0% in that data. It’s still awful, but a smidgeon less awful. Nonetheless, the Euro would benefit from that improvement.
But none of this might matter at all if the latest theories on Planet X are true. A massive object, known as Nibiru, was supposed to have ended all life on earth on 23rd September. It didn’t – just in case you were wondering. Now the conspiracy theorists claim the world will be impacted by this lump on 21st October. So, live your life to its fullest and kiss your loved ones. They could be right, couldn’t they?!

Daily Joke 

Two drunk guys wait at a bus stop.
A bus pulls up and opens the door. One of the guys leans inside and asks the driver, "Will this bus take me to Warwick Street?"
The bus driver says, "No, I'm sorry."
The other guy leans inside and asks, "How about me?"

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

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Final Manufacturing Purchasing Managers' Index 58.2 58.2
GBP 09:30 UK: Manufacturing Purchasing Managers' Index 56.9 56.3
EUR 10:00 EU: Unemployment Rate 9.1% 9.0%
CAD 14:30 Canada: Manufacturing Purchasing Managers' Index 54.6 54.6
USD 14:45 US: Final Manufacturing Managers' Index 58.8 57.9
USD 15:00 US: Institute for Supply Management Manufacturing Purchasing Managers' Index   58.8 57.9
USD 19:00 Federal Open Market Committee Member Kaplan Speaks