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December 2017

Sterling holds up after positive Bank of England statement

Published: Friday 15 December 2017

  • Sterling holds up after positive Bank of England statement
  • Canadian Dollar strength expected after housing data
  • US Dollar awaits industrial production and capacity utilisation
By  David Johnson

No news for Euro…
 
Surprisingly, the Euro didn’t strengthen when a number of European Central Bank members warned of tighter monetary policy if inflation keeps accelerating. Maybe the markets don’t see that happening, but the Euro stayed pretty steady. The lack of Eurozone data today should see it tread ground ahead of the weekend.
 
Sterling stands firm
 
The Sterling – Euro exchange rate is trying but failing to make a clean break above €1.14 but, in spite of the UK government’s mini-mutiny, Sterling hasn’t lost ground. The Bank of England (BoE) did as expected and left the base rate on hold at 0.5% yesterday, but they did speak positively about the UK economy. Will wonders never cease? They believe the breakthrough that was made regarding the exit bill and the Irish border will be good for the UK. Once traders had picked their jaws up off the floor, they started buying Sterling again. As with the Eurozone, there is no significant data due for the UK today, so, barring any further Brexit shenanigans, a bit of treading water would appear to be the order of the day.
 
More good news for manufacturers
 
Overnight we heard that the Tankan index shot up to an 11 year high this month, signalling a significantly improved mood in the manufacturing sectors. A reawakening in global demand has seen the index improve in the last five quarters. The Yen strengthened a little on the news and looks set to make further gains against the Pound, Euro and US Dollar.
 
Eyes turn to North America today
 
The only interesting data today comes from the North American continent. The Canadian Dollar strengthened yesterday after upbeat comments from the Bank of Canada and may well improve again after this afternoon’s housing data, which is forecast to bounce back from last month’s disappointing 0.9% growth in existing home sales. So, Canadian Dollar sellers might have a window of opportunity ahead of next week’s Canadian Gross Domestic Product (GDP) data, which looks set to disappoint.
 
This afternoon also brings US industrial production and capacity utilisation data. The forecasts for these are a mixed bag. We expect industrial production to have slowed a little, but that capacity utilisation will have expanded, hinting at higher prices for the future. If all is as expected, the USD is most likely going to remain stable as we head for the weekend and some serious Christmas shopping.

Frankly, my dear…
 
And on this day on 1939, ‘Gone with the Wind’, starring Vivien Leigh and Clark Gable premiered in Atlanta, Georgia. I would hazard a guess it has been on a TV channel or in a cinema somewhere ever since. It spawned some great quotes. “Frankly, my dear, I don't give a damn” is probably the most famous, but we also got, “As God is my witness, I'll never be hungry again” and “After all, tomorrow is another day”, but my favourite corny line is, “You should be kissed, by someone who knows how”. Shouldn’t we all?! Hopefully you will this weekend. Have a good one. 
Political hustings
 
A Senator went to a local Native American Reservation to drum up support ahead of the upcoming election. The whole tribe was gathered in the meeting hall to hear the speech. The Senator spoke for a while and then let loose with his promises; expecting to get the crowd behind him.

"I promise better education opportunities for Native Americans!"

The crowd went wild, chanting "Hoya, Hoya, Hoya, Hoya".

The politician was a bit puzzled by the native word, but was encouraged by their enthusiasm.

"I promise gambling reforms to allow a Casino on the Reservation!"

"Hoya! Hoya!" cried the crowd, stomping their feet.

"And, if you vote for me, I promise more social reforms and job opportunities for Native Americans! Thank you for coming", he said as he stepped back from the microphone.

The crowd reached a frenzied pitch shouting "Hoya! Hoya! Hoya!"
After the speech, the Politician was touring the Reservation, and saw a vast herd of cattle. Since he was raised on a ranch, and knew a bit about cattle, he asked the Chief if he could get closer to take a look at the cattle.

"Of course," said the Chief, "but be careful not to step in the hoya..."

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 10:00 EU: Trade Balance 25.0b 24.4b
GBP 12:00 Bank of England Quarterly Bulletin    
CAD 13:30 Canada: Manufacturing Sales 0.5% 0.9%
USD 13:30 US: Empire State Manufacturing Index 19.4 18.8
USD 14:15 US: Capacity Utilization Rate 77.0% 77.2%
USD 14:15 US: Industrial Production 0.9% 0.3%

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