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Sterling held back by Brexit impasse

Published: Friday 19 October 2018

  • Italy causing consternation in Europe
  • Mixed Chinese data
  • USD improves on strong data
​​By David Johnson

Whether the EU understands Theresa May’s plan is hard to assess because they only gave her fifteen minutes to explain it. They are playing a very arrogant hard ball kind of game with these negotiations, of that there is little doubt. Yet the EU does need the UK, needs London and needs what has long been known as Treasure Island for its exporters and for its tourism industry. The Prime Minister should not forget that.
The EU commission stated yesterday that Italy’s budget plans are a serious breach of EU rules and the head of the European Central Bank (ECB), Mario Draghi said breaching EU rules was a threat to the whole of the Eurozone. Meanwhile there are growing numbers of Italian MPs calling for the country to dump the Euro. It could be an interesting few months on that front. Italian Bond Yields are at five year highs; signalling concern from investors.
Sterling is a little lower after disappointing UK retail sales figures. Perhaps the fact that the seasons haven’t changed yet in the UK is delaying coat and woolly-pully purchases has had an impact. We will get a speech from Sterling’s nemesis this afternoon. Bank of England (BoE) Governor Carney has a habit of weakening the Pound every time he speaks, so be ready for that.
The Canadian Dollar got a fillip from 28,000 fresh jobs being created in September and the August figure was upgraded by roughly 30,000. That’s a significant increase overall. We should see an uplift in Canada’s consumer inflation but perhaps less encouraging retail sales figures today. There is scope for further CAD strength or quite the opposite if the numbers fall short.
We had Chinese data overnight and that confirmed that Gross Domestic Product (GDP) growth and industrial output have both slowed faster than forecast but retail sales, employment and business investment are holding up well. Meanwhile, the Chinese regulators have released a number of initiatives to boost the country’s struggling stock market. It’ll be interesting to see how that plays out.
The USD improved after strong Philadelphia Federal manufacturing and employment indices but the data diary is slimmer today. A smattering of housing data is probably not enough to shift the USD but anything on the China – US trade standoff will have an effect. So that’s the news area to watch.
And, perhaps Brett Kavanaugh felt his troubles were behind him, now that he has a very well paid and high profile job for life but, not so fast Kavanaugh. Thousands of Witches in America have now placed a hex on him; cursing him and all rapists and sexual deviants. Seems only fair. After all, the US President says Kavanaugh has been deemed guilty until proven innocent but let’s not forget, so has Doctor Christine Blasey Ford.

Some great short Jokes

“About a month before he died, my grandfather covered his back with lard. After that he went downhill very quickly.”
Milton Jones
“A bit of advice: never read a pop-up book about giraffes.”
Sean Lock
“Snooker is the best. Snooker is basically tidying up disguised as sport.”
Jon Richardson
“My wedding was like a fairy tale. It wasn’t magical; it’s just that I’ve got an ugly sister.”
Ellie Taylor
“Give a man a fish and you feed him for a day. But teach a man to fish, and, well you’ve saved yourself a fish, haven’t you?”
“My therapist says I have a preoccupation with vengeance. We’ll see about that.”
Stewart Francis

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Current Account 21.3b 21.4b
GBP 09:30 UK: Public Sector Net Borrowing 5.9b 4.6b
CAD 13:30 Canada: Consumer Price Index -0.1% 0.1%
CAD 13:30 Canada: Core Consumer Price Index 0.1% 0.1%
CAD 13:30 Canada: Retail Sales 0.3% 0.3%
CAD 13:30 Canada: Core Retail Sales 0.9% 0.1%
USD 15:00 US: Existing Home Sales 5.34m 5.29m

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