25th October 2017 Market Update
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?? GBP – It was another lacklustre day for the pound, with a lack of data and continued uncertainty weighing heavily. The currency lost ground in the afternoon versus both the euro and US dollar, after the EU’s Michel Barnier intimated that a trade deal could take up to three years to negotiate. This further compounds the stalemate in talks that has been apparent for some time and leaves Sterling merely treading water whilst investors wait.
Realistically, the only potential upside lies with the Bank of England and their interest rate decision due in early November. The inference has been that a rate rise could be forthcoming, but as each day goes by the justification for such a move could be seen as on the wane, with inflation stated to have topped out at 3% and the prospect of the UK walking away with no deal raising concerns that the pound could plummet further.
Today sees the reading of quarterly preliminary GDP figures. This is forecast to be the same as previous, but any unexpected deviation could impact the pound.
?? EUR – The single currency enjoyed some positive Manufacturing data yesterday, with both France and Germany registering an increase to forecasts. This helped to bolster the euro throughout the day.
Today is very quiet economically and it is likely that the currency will hold its ground.
?? USD – The greenback had a quiet day on the data front yesterday, but still managed to make gains versus a weakened pound.
Today sees a key reading of Core Durable Goods Orders, which is expected to be the same as previous. The dollar has been posting some positive fundamentals recently and any upside over expectations could see the dollar advance.
09:30am – UK Preliminary GDP q/q
13:30pm – US Core Durable Goods Orders m/m
Our View: It really is more of the same. Sterling recovery continues to rely heavily on Brexit negotiation results and without any positive leaks, the currency remains in no man’s land. In the short term, investors will be looking to the Bank of England to provide some respite in November.
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