Market Update: Dismal data doesn’t dent our deal dreams
This chilly November morning, warm yourself by catching up on recent events in the world of currency. The market is still optimistic over Brexit talk progress despite the EU's hesitation. There's lot of data out in Europe and the US today. Read on below for more.
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The Pound benefitted from healthy support provided by expectations that the UK would make a breakthrough in Brexit negotiations with it’s increased financial settlement offer. The EU parliament reiterated that not enough progress had been made, but the market shrugged it off. The tone surrounding Sterling was more optimistic with some hopes for movement on the Northern Ireland issue.
There was a re-pricing of interest rate futures, with markets more confident surrounding the growth outlook and bringing forward expectations of the next interest rate hike to September 2018. The shift in futures and rise in yields provided net Sterling support. There were still some concerns about month-end selling amid choppy trading conditions but the buyers still dominated. Sterling hit two-month highs near 1.3480 against the Dollar and tried valiantly to push the Euro past 1.1365.
US third-quarter GDP rose 0.3% from the previous quarter and was in-line with expectations of 3.3% for Q3 while pending home sales increased to 3.5% for October following the previous setback of a 0.4% decline the previous month.
In congressional testimony, Fed Chair Yellen continued her stance of expecting low inflation to be temporary but realised the very real possibility that this period may prolong. Yellen also stated how wage growth was being pushed by the strengthening of the job market and that the economy as a whole had strengthened. She did make it clear, however, that a gradual path towards a neutral monetary policy stance is still appropriate.
San Francisco Fed President Williams continued to back interest rate increases, wanting rates at a level of 2.5% over the next two years while Minneapolis head Kashkari remained more on the dovish side.
To finalise the busy US session yesterday, a generally hawkish Fed’s Beige Book reported a slight boost to the US outlook with increasing price pressures present despite moderate wage growth.
German consumer inflation increased to 1.8% from 1.6% in November and services-sector inflation increased to 1.5% from 1.2% which will cause some concerns within the Bundesbank. Jens Weidmann, President of the Bundesbank, stated that the European Central Bank (ECB) growth estimate could be raised and tensions within the ECB are liable to increase. The ECB’s Klass Knot openly contradicted the ECB’s official view in stating the inflation target has been hit and that the Asset Purchase Scheme should end in September.
Data to watch:
00:01 GBP Gfk Consumer Confidence (Nov) 07:00 EUR Retail Sales (YoY) (MoM) (Oct) 07:45 EUR Consumer Price Index (EU norm) (YoY) (Nov) n/a EUR EU Financial Stability Review 09:00 EUR Unemployment Rate s.a. (Nov) 09:00 EUR Unemployment Change (Nov) 09:00 EUR Unemployment (Oct) 10:00 EUR Unemployment Rate (Oct) 10:00 EUR ECB’s Praet Speech 10:00 EUR Consumer Price Index (YoY) (Nov) 10:00 EUR Consumer Price Index – Core (YoY) (Nov) n/a USD OPEC meeting 13:30 USD Core Personal Consumption Expenditure – Price Index (MoM) (YoY) (Oct) 13:30 USD Personal Consumption Expenditures – Price Index (YoY) (MoM)(Oct) 13:30 USD Personal Income (MoM) (Oct) 13:30 USD Personal Spending (Oct) 13:30 USD Continuing Jobless Claims (Nov 17) 13:30 USD Initial Jobless Claims (Nov 24) 14:45 USD Chicago Purchasing Managers’ Index (Nov) 18:00 USD FOMC Member Kaplan Speech