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September 2017

Sterling recovers a little but Repeal Bill failure could scupper gains

Published: Monday 11 September 2017

  • Sterling recovers a little but Repeal Bill failure could scupper gains
  • Inflation data abounds
  • No change expected from Bank of England
By David Johnson
After fairly turbulent markets and even more turbulent weather last week, at least the markets look a little calmer today. The storm blasting its way through Florida has brought devastation after laying waste to large tracts of the Caribbean. It has also brought out looters, but that is a wholly different story.

As for the markets, well, Monday is a quiet one, but the rest of the week.... Well, that's a different story. In the UK, we will get consumer inflation data, which is expected to have picked up to near the top end of the Bank of England's 1%-3% range. That isn’t likely to force any change from the Bank of England (BoE), though, and they meet on Thursday, but have already downplayed this short term inflation blip as it is largely due to one-off factors. The BoE will also have positive unemployment data and perhaps a small rise in average earnings to ponder. That data is due on Wednesday. Sterling starts the week stronger against the embattled US Dollar and back up near €1.10, but not quite there yet. The Pound is also looking much healthier against the Australasian currencies as they track the USD into weaker territory. Aside from the hard data, there is the small matter of the Repeal Bill, which may not get through the House of Commons and that would damage the Pound somewhat. 
USD traders are awaiting producer price and consumer price inflation from the US, along with manufacturing and industrial production data, as well as capacity utilisation numbers. All are very popular releases with the Federal Reserve and its watchers. So there is scope for volatility through the latter part of the week. However, the North Korea thing still rumbles on and the storms across the southern states have not blown away yet, so further damage to the US economy could ensue; not to mention the human impact.
The Euro has been boosted by recovering data and the weakness of the US Dollar but, whilst there are a few localised data releases this week, there is very little in the way of pan-Eurozone data for traders to focus on. There are a number of speakers from the European Central Bank (ECB) and members of the EU states this week. No doubt Brexit will be asked about where Q&A sessions happen. Everyone appears to still be at the ‘talking tough’ stage, so we can’t read too much into this rhetoric.
There is a plethora of Australasian data this week as well. We will have both business and consumer confidence data from Australia and New Zealand through the week. We’ll also get Australian employment numbers on Thursday. The currencies of Australia and New Zealand are also affected by Chinese data releases and we have Chinese retail sales data later in the week.
So, it may well be a breathless affair, but volatility is a good thing if you harness it for your own benefit.
A side note to the hurricane stories is the one about two manatees that were left high and dry when Hurricane Irma sucked all the water out of Sarasota Bay in Florida. Wildlife rescuers were able to load them onto tarpaulins and slide them back to deeper water. The pictures of bays devoid of any sea water are bizarre.
Sensible Solution

I met a friend in the street and he looked battered and bruised.
“What happened to you?” I asked.
“Well,” he said, “I borrowed my wife’s bike to go to the off licence. I bought a bottle of whiskey and I put it into the basket on the front but then I had second thoughts. I thought, I’m not used to this bike and I might fall off. And if I fall off, that bottle will break. So I decided to drink the whiskey before I rode home. And d’you know what? I was right to do that, because I fell off seven times.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 13:15 Canada: Housing Starts 222k 216k
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