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Sterling drops on Brexit talk failure

Published: Monday 15 October 2018

  • Merkel’s partners suffer in State elections
  • New Zealand inflation data tonight
  • Minutes from Reserve Bank of Australia meeting should be edifying
​​By David Johnson

As was probably inevitable, Sterling dipped at the first news that all is not going swimmingly in the Brexit negotiations. The speculation of a deal today came to an end when the weekend’s hurriedly arranged visit by UK negotiators to the EU side drew a blank on the Irish border issue. No one wants a hard border between the north and south in Ireland, but no one knows what the alternative is. Unstoppable forces and immovable objects, eh?

Either way, we start the week with the Pound a cent lower against the Euro and a cent and a half lower against the US Dollar. The EURUSD rate is down by three quarters of a cent too. Sterling’s hurdles for the week (in addition to Brexit tomfoolery) will come in the form of inflation, retail sales and a speech from the governor of the Bank of England (BoE). All have the potential to shift Sterling, so beware.
Brexit blunderings likely to overshadow EU data this week

There is some Eurozone data this week, but the poor showing by Angela Merkel’s party and partners in the State elections and Thursday’s EU meeting to discuss Brexit will most probably overshadow the data. The German state elections showed yet again, that the open immigration policy adopted by Merkel has augmented support for the more right wing parties. And those who could not bring themselves to vote for right wing parties appear to have switched to the Greens. It has been less reported this weekend but Italy’s proposed budget is also a bugbear for the EU leaders, as it flouts budget deficit agreements. It’ll be another exciting week in politic-EU.
High hopes for the US Dollar today – will trade wars dull its sparkle?

The big data for the US this afternoon is retail sales. The forecasters are very excited about this and are predicting a sharp rise to 0.7% growth on the month to September, after just 0.1% growth the previous month. If true, the USD will benefit. However, tensions between China and the US persist and that has the propensity to overshadow anything the core data throws at us.
Antipodean answers eagerly anticipated

Overnight tonight, we will get inflation data from New Zealand. That is predicted to show a healthy rise of 0.7% on the quarter in Q3. The New Zealand Dollar will be volatile – especially if the actual data misses the forecast.
We will also get sight of the minutes from the last Reserve Bank of Australia (RBA) meeting before London opens tomorrow. The RBA is wrangling with a strong economy but regionally poor house sectors and the potential for higher inflation now that the Aussie Dollar has weakened a little. It will be very interesting to hear their plans for all of that.
At least we’ll all be able to get away from the snog by snog account of who kissed whom on that dancing show. Gawd ‘elp us.

Faith healing

A well-known faith healing pastor was visiting an inner city area and performing minor miracles on the sick and old. In the midst of the meeting a young man came forward and said, “So you help people, right?”
“Yes I do,” said the pastor.
“Can you help me with my hearing?” said the young man.
“I can certainly try,” said the pastor
With that, he laid his hands on the young man’s head, called for help from the Lord and then moved his hands down to cup each side of the young man’s head. After about 90 seconds, he said to the assembled crowd, “I think the Lord has helped this young man.”
He turned to the young man and said, “How is your hearing now?”
“Dunno,” said the youth, “It’s on Tuesday at the magistrate’s court.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
USD 13:30 US: Retail Sales 0.1% 0.7%
USD 13:30 US: Core Retail Sales 0.3% 0.4%
USD 13:30 US: Empire State Manufacturing Index 19.0 20.4
USD 15:00 US: Business Inventories 0.6% 0.5%
CAD 15:30 Bank of Canada Business Outlook Survey    
NZD 22:45 New Zealand: Consumer Price Index 0.4% 0.7%

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