30th October 2017 Market Update
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?? GBP – A slow start last week made the pound look vulnerable especially with Michel Barnier suggesting a trade deal between the EU and Great Britain could take up to three years to agree. Wednesday saw the release of preliminary GDP which was positive, handing the pound its best day in a fortnight.
Very typically there is no economic data this week until the interest rate decision on Thursday. There has been huge speculation of whether the BoE will or will not raise interest rates. Positive data suggests a strong possibility but with the BoE’s constant stubbornness it’s anyone’s guess.
?? EUR – Small pieces of data early last week kept the euro in its recent relatively strong position. On Thursday the ECB announced that it will start to cut back its quantitative easing programme but with no firm end date coupled with the suggestion that inflation will remain below 2% for at least a couple years the euro fell to its lowest level of the week.
German retail sales figure came out this morning slightly lower than expected, preliminary inflation figures are also expected to fall slightly for Germany. Eurozone inflation and GDP are out tomorrow and are expected to fall slightly (as the ECB suggested last week), meaning the euro will likely remain at similar levels. No significant data for the rest of the week.
?? USD – There was no economic data at the start of the week from the US. Positive durable goods figures on Wednesday added to the pressure mounting on the Fed to raise interest rates in December. Initial jobless claims also beat expectations on Thursday.
Again a slow start to the week for the dollar then come Wednesday it kicks into life with ISM manufacturing expected to drop slightly during the day. Then at 7.00pm we have the Fed interest rate decision where analysts are not expecting a raise but the comments that follow could be key as to whether they raise or not in December. Friday is another big day with the unemployment rate expected to rise slightly and the ever important non-farm payrolls which are expected to improve.
GDP – Expected to improve to 2.4% from 2.3%
CPI – Expected to drop from 1.3% to 1.2%
ISM manufacturing expected at 59.0 from 60.8
Fed monetary policy statement and interest rate decision
Unemployment rate expected to remain at 4.2%
Non-farm payrolls expected to improve to 300k from -33k
BoE interest rate decision and press conference
Our View: With the BoE forecast to raise rates and UK economic data impressing of late, there’s the potential of a strong pound coming into the winter months. The Fed are also looking to raise rates in the US which could mean the start of a weak period for the euro. Having said this central banks have a knack for disappointing so we wait and see.
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