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October 2017

Sterling slips on economic and political worries

Published: Friday 06 October 2017

  • Sterling slips on economic and political worries
  • USD stronger ahead of employment data
  • Euro boosted by German factory orders 
By David Johnson
Sterling had another poor day, ceding ground to the Euro, USD and others. Weak car sales, Theresa May’s fragile hold on the keys to Number 10 and fears raised by credit ratings agency Standard & Poor’s over whether the UK economy could cope with an interest rate hike are all factors here. The lack of UK data today is likely to leave the Pound vulnerable as we head to the end of the week. These are very attractive opportunities for those who need to buy GBP right now.
The Euro has been boosted this morning by a solid uplift in German Factory orders. A month on month rise of 3.6% in new orders is the best result this year and points to at least one of the EU economies doing well. The big news for Europe though is the dispute in Spain over whether the Catalan parliament can or will declare independence from Spain after their referendum. Spain’s constitutional court has said they cannot but they may do so anyway. We can but wish and hope that this will not descend into violence like the vile images we saw during the vote itself, but emotions are running high and it is yet another unsettling factor in the EU’s pantheon of a ‘to deal with’ list. Volatility before the markets open in the UK on Monday is highly likely, so Euro buyers and sellers may wish to place automated orders to ensure you do not miss out on the fluctuations.

For its part, the US Dollar was boosted by some progress on tax policy and stronger capital goods data and ahead of what could be very strong employment numbers due today. The caveat to the forecasts is whether the recent hurricanes have wiped out jobs as well, but that may not show up in these immediate figures.
This afternoon also brings Canadian employment data and the forecasters seem to be all over the place on this. Thus, the Canadian Dollar could well be very volatile around 12.30 GMT when the numbers are released. The GBP-CAD rate is around the middle of its range over the last year, so there is room to break in either direction. ‘Forewarned is forearmed’ and all that…
As China’s Golden Week holiday nears its end, the Chinese markets and those affected by China are preparing for the quinquennial Communist Party Congress, which begins on 18th October. The party faithful will meet to reshuffle and probably to extend President Xi’s reign, but there may be little activity in China in the next ten days or so and that has implications for countries that service the behemoth Chinese economy. We may well see some weakness in the currencies of commodity exporting countries.
The Australian Dollar is one of those currencies and it has been kept weak by words from Ian Harper, a member of the Reserve Bank of Australia (RBA) board. Mr Harper suggested that poor retail sales were not enough reason in themselves to cut the base rate but that the RBA was keeping a watching brief. The mere hint of a potential rate cut was enough to stop the Aussie Dollar from strengthening against the beleaguered Pound.
The opening sequence in ‘Cool Hand Luke’ shows Paul Newman decapitating parking meters, and for that he is arrested. It seems this is coming to life in St Johns, Canada. The local authorities installed new style parking meters three years ago but they are being beheaded and the tops taken away, presumably for the cash inside, but maybe as ornaments. The units cost C$474 each, but generally only contain C$10 or so. Why not let people park for free? Yellow lines and parking meters have been sounding the death knell on town centres for years. 
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news
One liners
  • I went to the corner shop and came home with five corners.
  • My next-door neighbour asked me to join him in worshipping exhaust pipes, he's a catalytic converter
  • 'I ordered food in the Chinese restaurant and this duck came up to me with a red rose and says "Your eyes sparkle like diamonds". I said, "Waiter, I asked for a-ROMATIC duck".’
  • What’s ET short for? Well, he’s only got little legs. 

Today's major economic releases

Market BST Data/Event Previous Expected
GBP 13:00 Monetary Policy Committee Member Haldane Speaks    
CAD 13:30 Canada: Employment Change 22.2k 13.9k
CAD 13:30 Canada: Unemployment Rate 6.2% 6.3%
USD 13:30 US: Average Hourly Earnings 0.1% 0.3%
USD 13:30 US: Non-Farm Employment Change 156k 82k
USD 13:30 US: Unemployment Rate 4.4% 4.4%
CAD 15:00 Canada: Ivey Purchasing Managers' Index 56.3 56.0
USD 15:15 Federal Open Market Committee Member Dudley Speaks     
USD 15:45 Federal Open Market Committee Member Kaplan Speaks    

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