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October 2017

Sterling slips on further Brexit chatter

Published: Wednesday 04 October 2017

  • Sterling slips on further Brexit chatter
  • Wednesday is awash with service sector indices 
By David Johnson
 
 
Tuesday was very light on significant market moving data. However, we did witness more ‘Brexit related’ movement in the Pound. Sterling slipped on two main news items. UK Trade Secretary Liam Fox mocked the EU Parliament’s non-binding vote to ban UK/EU trade talks until after Brexit and added that, if there is no deal by March, the UK will have to walk.  UK Brexit Minister David Davis said at the Conservative Party Conference that we will be ready for the alternative if Britain fails to get a deal.
 
Their speeches both appealed to people to stop being so pessimistic over Brexit and listed a number of positives we have witnessed in the UK economy, ‘despite Brexit’.  However, Sterling slipped. There appears to be a pre-programmed trading principle at play that automatically sells the Pound when UK politicians mention Brexit. Interestingly, though, UK data is tending to show improvement in many areas and that counterbalances the Brexit-pessimism.
 
Sterling slipped below €1.13 against the Euro and, having peaked on 20th September near $1.36, Sterling slid to $1.32 yesterday. In fact it has fallen in nine of the past 12 trading sessions.  Aside from the aforementioned Brexit Damocles’ Sword, the broader US Dollar recovery is pushing the Pound lower.
 
Today brings Service Sector Purchasing Managers’ Indices (PMI) from Germany, France and Spain, three of the largest Eurozone economies. All have differing problems, so this data is closely watched. The forecasts are positive, so expect a sharp reaction if the data disappoints. We will also get Eurozone retail sales numbers and an annualised 2.6% growth rate is forecast.
 
The UK service sector results came out at 53.6 in September, up from the lowest result in almost a year in August of 53.2. The latest figures show sustained yet slower growth in the face of increasing cost pressures.
 
More importantly, we have speeches from the heads of the Eurozone and US central banks later. European Central Bank (ECB) head, Mario Draghi, is due to speak at 18:15 GMT and Federal Reserve Chair, Janet Yellen, follows that at 20:15 GMT. Well placed overnight orders in the Euro and USD crosses may well prove fruitful.
 
And paranoia is getting to all of us. Residents in Zurich reported a man for flying a terrorist flag outside his house. The predominantly black flag was later identified not as the so-called Islamic state banner, but a Jack Daniels one. A different sort of evil, I guess.
 
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news
_____________________________________________
Confession
 
I scared the postman today by going to the door completely naked.
I’m not sure what freaked him out more – me being naked or the fact that I knew where he lived.

Today's major economic releases

 
Market BST Data/Event Previous Expected
EUR 09:00 EU: Final Services Purchasing Managers' Index 55.6 55.8
GBP 09:30 UK: Services Purchasing Managers' Index 53.2 53.2
EUR 10:00 EU: Retail Sales -0.3% 0.3%
USD 13:15 US: ADP Non-Farm Employment Change 237k 131k
USD 14:45 US: Final Services Purchasing Managers' Index 55.1 55.1
USD 15:00 US: ISM Non-Farm Manufacturing Purchasing Managers' Index 55.3 55.3
EUR 18:15 European Central Bank President Draghi Speaks    
USD 20:15 Federal Reserve Chair Yellen Speaks