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News in Brief - 16/11/2017

GBP

Monex  
 

Sterling was making gradual inroads against the USD during the morning, only to see all of its gains evaporate after the dollar found its feet at the start of the afternoon. Against the euro, the day was lived in reverse; a morning with sterling weakness was later compensated during the afternoon. This morning brought the British pound some weakness for breakfast after Politco reported the European Union had turned down British attempts to establish a bespoke trade deal with the EU. The story based on leaked documents mentioned that the stance of the EU is “no direct branching in areas like financial services” and only “limited EU commitments to allow cross border provision of services”. Average Weekly Earnings were slightly stronger than expected with an annualized growth in the last 3 months of 2.2%. Today at 9:30 BST we have Retail Sales, concluding the UK triad of top tier releases of this week.

EUR

The euro was on a solid rally yesterday throughout the morning, extending the gains it made earlier this week against most of the G10 currencies. A bit after midday euro began to retreat, but not before putting a four week high on the board against USD and breaching multi-year record highs against Scandinavian currencies. Global risk sentiment seems to have been the driver behind this euro strength. Little data was released for the Eurozone yesterday, besides the French final Consumer Prices that grew 0.1% as expected in October. Today we have the final Consumer Price numbers for the entire Eurozone at 10:00 BST.

USD

The US dollar weakened across the board during the morning, only to turn things around after midday and close more or less at the same place where it started against sterling, euro and a crowd of other currencies. The Consumer Price Index came in “unexpectedly on expectations” after having core CPI disappointing in 6 out of the last eight months. Now CPI seems to be making its way back to its trend level of 0.2% growth per month the story of the Federal Reserve that the weak inflation seen earlier this year was due to transitory factors is gaining in credibility. Core Retail Sales disappointed but a strong headline reading, supported by hurricane-boosted car sales, made up for this and started the USD afternoon rally. Today at 13:30 BST we have unemployment claims together with Import Prices and the Philly Fed Manufacturing Index, followed by Industrial Production at 14:15 BST.

 
 
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UK News - 16/11/2017

FT: Banks urge Brexit trade deal that keeps financial services on track Free movement for professionals vital to preserving cross-border flows, says industry. Britain’s banking industry has called for a post-Brexit trade deal to allow financial services professionals to continue travelling freely across Europe on assignments of up to three years. The proposal, coming shortly after David Davis, the Brexit secretary, promised to seek a similar travel regime for bankers, is one of several recommendations in a report to be published on Thursday by UK Finance, the industry body, and law firm Clifford Chance. The report presents the most detailed blueprint of how a long-term agreement on financial services between the UK and EU might work in preserving the cross-border flow of trading, capital and staff after Brexit.

Reuters: UK retail sales fall on year for first time since 2013 as inflation and tough comparison weigh. British retail sales recorded their first year-on-year decline since 2013 last month, despite solid growth in volumes from September, as households battled with fast-rising prices.Britain’s Office for National Statistics said October’s 0.3 percent year-on-year fall in sales volumes was the biggest since March 2013 and reflected a very strong performance by retailers in October 2016. Looking at the three months to October, which smooths out monthly volatility in the data, sales growth picked up to 0.9 percent from 0.7 percent in the three months to September. Compared with a year earlier, however, sales volumes in the three months to October were just 1.1 percent higher than the year before, the weakest growth rate since May 2013.

News in Brief - 15/11/2017

GBP

Dollar weakness allowed GBPUSD to rally yesterday, despite a soft inflation print and ongoing political farce in the UK, but the pound was less fortunate against the euro, where it fell to fresh lows for the month yesterday and again this morning. Yesterday’s parliamentary shenanigans included prominent Conservative MPs defying the Government’s efforts to legislate a fixed date for Brexit, despite – in MP Dominic Grieve’s words – “blood-curdling threats”. YEsterday’s inflation data showed price pressure broadly unchanged in the UK, with the headline Consumer Price Index remaining at 3.0% year on year, the same as last month. This morning’s labour market data has put further mild pressure on the pound, after the Unemployment Rate remained unchanged at 4.3% in September and Average Weekly Earnings growth remained at 2.2%.

EUR

The euro has had an incendiary 24 hours, after yesterday’s firm German GDP data combined with renewed global risk aversion overnight to create perfect conditions for strength in the single currency. Yesterday’s data included a firm print for the German ZEW Economic Sentiment Survey, which rose to 18.7 in its latest index reading, although eurozone Industrial Production fell by 0.6% as expected, after a big 1.4% increase previously. Today at 10:00 BST monthly Trade Balance data will be released for the eurozone.

USD

The dollar took an absolute beating yesterday, as investors sold global risk assets and US treasuries saw falling yields across large parts of the sovereign curve. Fed Chair Janet Yellen appeared on a panel with her colleagues Kuroda (Japan), Carney (UK) and Draghi (ECB), and although the topic was central bank communications, a few interesting tidnits emerged when Yellen acknowledged the difficulty of policy makers expressing views on how they would vote ahead of a meeting. The Producer Price Index rose 0.4% in October, far above expectations, but this did little to support the Greenback. Today’s Consumer Price Index and Retail Sales releases at 13:30 GMT are therefore make or break for the greenback, and they will be followed by Business Inventories at 15:30 BST.

UK News - 15/11/2017

FT: Pro-EU rebel Tories hit back after being branded ‘mutineers’. Skirmish reflects rising tensions over Brexit legislation. Pro-EU Conservative MPs have reacted defiantly to a front-page article in the Daily Telegraph depicting them as “mutineers” because of their opposition to elements of the government’s Brexit legislation. In a skirmish that reflects growing tension in the Tory party, Anna Soubry, a backbencher, accused the newspaper of engaging in a “blatant piece of bullying”, while Heidi Allen, a colleague, challenged Brexiter critics to “bring it on”. Pro-EU Tories have also threatened to rebel over government attempts to impose a fixed exit date — March 29 2019 at 11pm London time — which they say would tie Britain’s hand in talks.

Reuters: UK employment falls in third quarter, pay growth lags inflation again. Reuters Staff The number of people in work in Britain fell by the most in more than two years in the three months to September, a latest sign of weakness in Britain’s Brexit-bound economy, official data showed on Wednesday. At the same time, the inactivty rate – a measure of people not in work and not seeking a job – rose by the most in nearly eight years, the Office for National Statistics said. The data showed the unemployment rate held at a four-decade low of 4.3 percent as the number of people in employment fell by 14,000 and pay growth remained much slower than inflation. The ONS said workers’ total earnings, including bonuses, rose by an annual 2.2 percent in the three months to September, compared with 2.3

News in Brief - 14/11/2017

GBP

Political turmoil finally began to weigh on sterling yesterday, leading to losses against EUR and USD. The UK’s chief Brexit negotiator David Davis spoke in the House of Commons yesterday and tried to appeal to Tory backbenchers when he told the parliament will be allowed to vote on the final Brexit deal coming out of the negotiations. Today at 9:30 BST the Consumer Price Index and the Producer Price Index will be made public. Bank of England Mark Carney will speak at 10.00 BST at the ECB conference in Frankfurt, alongside the Bank of Japan’s Kuroda and Mario Draghi of the European Central Bank.

EUR

After a quiet day yesterday, the euro enjoyed a modicum of strength this morning against the greenback based on some smashing German data. The first reading of the GDP jumped to 0.8% in the third quarter, bringing year on year growth. A solid reading in the final quarter might bring the German growth close to a scorching 3% annual growth. At 10.00 BST we will see the flash GDP reading for the entire eurozone, the ZEW Economic Sentiment survey and Mario Draghi speaking at a central bank communications conference hosted by the European Central Bank in Frankfurt.

USD

The weighted USD index DXY traded more or less flat on the day yesterday, though gains made against sterling stood out. The Republican Party continues to attempt to make progress on reconciling different tax reform bills proposed by Congress and the Senate, with last week’s news about the Senate proposing a delayed implementation for corporate tax cuts still reverberating in media. Outgoing Federal Reserve Chair Janet Yellen will also join the panel discussion with Draghi, Carney and Kuroda at the ECB conference at 10.00 BST. US Producer PRices are due at 13:30 BST.

UK News - 14/11/2017

Reuters: Weaker than ever, May faces test in parliament over Brexit plans Prime Minister Theresa May’s blueprint for Britain’s exit from the European Union faces a crucial test starting on Tuesday, when members of parliament try to win concessions from a weakened leader on the government’s legislation to sever ties. It is yet another battle for May after scandals and gaffes that have brought questions about her leadership into the open. As many as 40 of her MPs would support a no-confidence motion against her, according to the Sunday Times newspaper. But many sources in her governing Conservative Party say now is not the time to force her out because despite backing Britain remaining in the EU, even if reluctantly, they think she is still the best option to deliver Brexit.

FT: Euro climbs after German GDP data beat estimates The common currency got a boost on Tuesday after Germany reported stronger than expected economic data that provided the latest evidence of the acceleration of the eurozone’s biggest economy. Germany’s economic output climbed at a sequential clip of 0.8 per cent in the third quarter, exceeding economist expectations of 0.6 per cent. The report was the most recent sign of strength for the bloc’s powerhouse and bolsters the case for the European Central Bank to begin tightening monetary policy next year.

News in Brief - 13/11/2017

GBP

After a solid performance on Friday, sterling has gotten out of the wrong side of the bed this morning, erasing almost all of last week’s gains versus the US dollar. UK politics was once again thrown into upheaval as reports emerged yesterday that the amount of Conservative party MPs willing to sign a vote of no confidence in Theresa May’s leadership was approaching the critical threshold for a challenge to the Prime Minister’s position. Politics is therefore likely to dominate sterling this week as every scrap of information about the likelihood of May getting deposed is priced into financial markets. There are some top tier data releases on the calendar, including Price Indices on Tuesday and Labour Market data on Wednesday.

EUR

After ending last week stronger amid a wave of risk aversion in global markets, the euro sold off slightly overnight. This morning’s data has included German Wholesale Prices, which changed 0.0% in October after a 0.6% spike last month. No further data will be released today, but the eurozone calendar livens up tomorrow with German Gross Domestic Product data out early in the morning, followed by eurozoneGDP and the widely followed ZEW Economic Sentiment Survey later in the morning.

USD

USD was well bid overnight, after coming under broad pressure in the second half of last week. Donald Trump’s visit to Asia continued with a surprise serenade from Rodrigo Duterte, who sung hit Filipino love song “You are the light” at a dinner in Manila. The Philippines President’s regime has been widely criticised by human rights groups for a ferocious campaign of extrajudicial killings against alleged drug dealers, something Trump has praised Duterte for doing an “unbelievable job” with, despite tensions in the two leaders’ public communication at other times. The tax reform debate will continue to rage in the United States this week, as the two houses of Congress attempt to reconcile and pass legislation, with possible consequences for USD. This will be a busy week for data, although no headline releases are scheduled for today. Producer Prices will be released tomorrow, followed by Consumer Prices on Wednesday alongside Retail Sales.

UK News - 13/11/2017

FT: Pound drops after Theresa May no-confidence report. Sterling hit as Tory MPs said to plan challenge against UK prime minister. The pound fell fast on Monday following reports over the weekend that a group of Conservative members of parliament had agreed to sign a letter of no-confidence in Theresa May, UK prime minister.The moves wiped out more modest gains made by the pound on Friday, following a press conference from UK and EU Brexit negotiators. Monday’s heavy selling underscored sterling’s vulnerability to political factors such as the UK’s talks on the terms of its departure from the EU. A report in The Sunday Times said that 40 MPs had agreed to sign the letter of no-confidence amid concerns about Mrs May’s handling of Brexit.

News in Brief - 10/11/2017

GBP

Sterling saw some intraday volatility yesterday, ultimately closing higher against USD and lower versus the euro. Little headline data was released, and news media were focussed on domestic political turmoil and ongoing Brexit negotiations, the latest round of which will conclude this week. Divorce payments remain the main point of contention, with the EU reportedly insisting on financial agreement by the end of the month in order to progress talks to a transitional agreement. Reports have emerged this morning that Theresa May is seeking to increase the current £20bn offer, a development that could potentially prove strongly sterling positive if it leads to a breakthrough in talks.

EUR

The euro benefitted from a mild risk-off move in global markets yesterday, as the Nikkei 225 index led equities lower, implied volatility from S&P500 options spiked, and other funding or haven currencies such as CHF and JPY performed well against USD. How far the move will extend remains to be seen. Yesterday’s data included a big upgrade in the European Commission’s official economic forecasts for the eurozone. Growth is now expected to be a whopping 2.3% this year in the eurozone, and 1.9% by 2019. Helpfully, the Commission included a forecast that growth will fall to 1.5% in 2017 in the United Kingdom, and 1.1% by 2019 as Brexit uncertainty weighs on investment intentions. This morning’s data has included a strong recovery in French Industrial Production, which rose 0.6% after a 0.2% fall previously.

USD

USD performed poorly on the whole yesterday, as tax reform proposals continued to hit stumbling blocks of various shapes and sizes. The Senate revealed plans to delay cuts to corporate taxes until 2019, in a bid to mitigate the fiscal effects of the tax cut. The legislation is expected to move to the house for a vote next week. But between concerns about the fiscal impact of the tax cut, and fighting about the deductibility of state and local taxes, meaningful tax reform remains a challenging proposition for the GOP and a distant hope for dollar bulls. The US will enjoy the Thanksgiving holiday today, and no data will be released.

UK News - 10/11/2017

FT: Theresa May ready to increase £20bn Brexit divorce offer. Eurosceptics accept more money may be needed to break talks deadlock. Theresa May is ready to increase Britain’s offer to the EU over the Brexit divorce bill, after signs that the hard Eurosceptics in her party will tolerate paying more money to break the deadlock in negotiations. Mrs May has said that Britain “will honour commitments we have made during the period of our membership” and her team are working on different scenarios that would see her considerably increase the €20bn she has already put on the table. No big breakthroughs on money were made in the sixth round of Brexit talks, which conclude on Friday in Brussels.

Reuters: Britain agrees to set EU “Exit Day” in law. Britain’s government said on Thursday it would use legislation to fix the time and date of the country’s European Union exit, addressing concerns of Brexiteers who fear slow negotiations and opposition to the divorce could cause delays. The government said it was proposing a change to the EU (Withdrawal) Bill currently making its way through parliament to set the exit for 2300 GMT on March 29, 2019. “We’ve listened to members of the public and Parliament and have made this change to remove any confusion or concern about what ‘exit day’ means,” Brexit minister David Davis said in a statement. The date has previously been implied by a fixed two-year negotiating period triggered on March 29, 2017, but not explicitly stated in law.

News in Brief - 09/11/2017

GBP

Having sold off yesterday, sterling found its legs overnight and has managed to claw back some of its recent losses. Theresa May’s Government remains beleaguered, with Priti Patel, the international development secretary, resigning from the cabinet this morning following controversy over an unauthorised visit to Israel. Pressure is also mounting from Brussels, who have given a two to three week deadline for Britain to set out how much it is willing to pay as a Brexit divorce settlement. Economic data also failed to help, with the Royal Institute of Chartered Surveyors releasing its monthly survey of members opinions of their local housing markets, which showed a market fall in optimism. The net balance of surveyors reporting price increases in their areas fell to 1%, and the housing market was described as “stuttering”. Today at 13:00 GMT the National Institute for Economic and Social Research will release its latest Gross Domestic Product Growth estimate.

EUR

EURUSD traded sideways yesterday, but has seen a break above yesterday’s trading range this morning, helped along by yet another bumper surplus for the German Trade Balance. Yesterday’s paucity of headline dada continues into today, although the European Central Bank’s Economic Bulletin was released this morning. At 10:00 the latest official economic forecasts from the European Commission will be released.

USD

USD price action was deeply uninspiring against GBP and EUR yesterday, but the greenback continued its tug of war with petro and resource linked currencies yesterday, losing ground to the loonie, aussie, and kiwi. Donald Trump wrapped up his two day state visit to China with some comments on China’s trade surplus with the US, although interestingly he went as far as asking “who could blame” China for the situation, instead placing the responsibility on past US leaders for the situation. Conventional economic theory holds that it is the United States’ savings and investment levels, not Chinese or even US trade policy, that is primarily responsible for the trade balance. Today at 13:30 GMT, weekly Unemployment Claims will be released, followed at 15:00 by Wholesale Inventories.

UK News - 09/11/2017

FT: EU gives UK up to 3 weeks to make Brexit bill offer.  December summit could fall short on transition guidelines without settlement. Brussels is giving Britain two to three weeks to set out how much it is prepared to pay in the Brexit divorce settlement, warning that the EU will otherwise struggle to prepare this year for a transition deal the UK badly wants. According to the informal deadline, unless London makes a big financial offer this month, the bloc may be unable to adopt guidelines for the transition talks at a crucial summit in December. “We need to know soon,” said one senior EU negotiator. “There isn’t much time, there are no shortcuts.”

Reuters: In new test for PM May, aid minister resigns.  British aid minister Priti Patel was forced from office on Wednesday over undisclosed meetings with Israeli officials after Prime Minister Theresa May sought to reassert her diminished authority as she negotiates Brexit. Patel, a Brexit campaigner who is popular in the ruling Conservative Party, had to abandon a trip to Africa earlier on Wednesday after being summoned by May to answer questions on more unsanctioned meetings that breached diplomatic protocol. After a hastily arranged meeting not long after Patel landed in London, May’s office released her minister’s letter of resignation, in which Patel said her conduct in Israel had fallen “below the high standards” required of her post. “While my actions were meant with the best of intentions, my actions also fell below the standards of transparency and openness that I have promoted and advocated,” Patel wrote in the letter to May.

News in Brief - 08/11/2017

GBP

Sterling traded higher against USD and EUR yesterday, as political headlines dominated the news cycle and little headline UK data was released. New Car Registrations fell for the seventh consecutive month in October, registering a 12.2% year on year fall, according to the Society of Motor Manufacturers and Traders. Typically, consumers may delay big ticket purchases such as cars in a climate of economic uncertainty. Official UK Retail Sales remain in growth overall on a year on year basis, for now at least, but this morning’s data has included a surprise fall in the British Retail Consortium’s Retail Sales Monitor for October.

EUR

The euro has had an eventful start against USD this week, weakening throughout yesterday morning and afternoon before rallying in the evening – only to give up the same ground yet again this morning. Yesterday’s data included Sentix Investor Confidence, which rose sharply to 34.0, as the surveyed investors reported levels of confidence consistent with an economic boom. Producer Prices, in the meantime, rose 0.6% in September. This morning’s data has included the eurozone Retail Purchasing Managers Index, which showed a score of 51.1, slightly lower than expected. Later in the morning, hard Retail Sales figures will be released.

USD

The US dollar reached its strongest level against the euro since mid-July, while giving up ground against sterling and commodity linked currencies. Elsewhere, bond market volatility sank to record lows as markets wait for more information about the likely approach of newly nominated Fed chair Jerome Powell, and potential changes in fiscal policy due to tax reform. This afternoon at 15:00 GMT we have the Job Openings and Labour Turnover Summary. Tonight at 19:30 GMT Janet Yellen is due to deliver her first public speech since not being renominated as Fed chair.

UK News- 08/11/2017

Reuters: UK retailers suffer worst October since 2008. British retail spending fell last month at the fastest pace for any October since 2008 as consumers curbed purchases of non-food goods in the face of rising inflation, a survey showed on Tuesday. Retail sales values slid by an annual 1.0 percent on a like-for-like basis, which strips out changes in store size, the British Retail Consortium (BRC) said, compared with a 1.9 percent rise in September. Another survey from payments company Barclaycard (BARC.L) also showed weak consumer spending, with a similar split between spending on essentials at the cost of spending on discretionary items. Last week, the Bank of England raised interest rates for the first time in more than 10 years.

FT: Dublin calls for 5-year Brexit transition period.  Coveney rails against ‘game of chicken’ as Irish concerns of collateral damage mount. Ireland has called for a transition period of up to five years after the UK leaves the EU in March 2019, in a sign of Dublin’s mounting concern that it will suffer collateral damage from Brexit. Simon Coveney, Irish foreign minister, also told the Financial Times in an interview that it was “not realistic” to agree a fully fledged UK-EU free-trade deal next year, even though Theresa May, Britain’s prime minister, has set out just such a goal.

News in Brief - 07/11/2017

GBP

Sterling traded higher against USD and EUR yesterday, as political headlines dominated the news cycle and little headline UK data was released. New Car Registrations fell for the seventh consecutive month in October, registering a 12.2% year on year fall, according to the Society of Motor Manufacturers and Traders. Typically, consumers may delay big ticket purchases such as cars in a climate of economic uncertainty. Official UK Retail Sales remain in growth overall on a year on year basis, for now at least, but this morning’s data has included a surprise fall in the British Retail Consortium’s Retail Sales Monitor for October.

EUR

The euro has had an eventful start against USD this week, weakening throughout yesterday morning and afternoon before rallying in the evening – only to give up the same ground yet again this morning. Yesterday’s data included Sentix Investor Confidence, which rose sharply to 34.0, as the surveyed investors reported levels of confidence consistent with an economic boom. Producer Prices, in the meantime, rose 0.6% in September. This morning’s data has included the eurozone Retail Purchasing Managers Index, which showed a score of 51.1, slightly lower than expected. Later in the morning, hard Retail Sales figures will be released.

USD

The US dollar reached its strongest level against the euro since mid-July, while giving up ground against sterling and commodity linked currencies. Elsewhere, bond market volatility sank to record lows as markets wait for more information about the likely approach of newly nominated Fed chair Jerome Powell, and potential changes in fiscal policy due to tax reform. This afternoon at 15:00 GMT we have the Job Openings and Labour Turnover Summary. Tonight at 19:30 GMT Janet Yellen is due to deliver her first public speech since not being renominated as Fed chair.

UK News- 07/11/2017

Reuters: UK retailers suffer worst October since 2008. British retail spending fell last month at the fastest pace for any October since 2008 as consumers curbed purchases of non-food goods in the face of rising inflation, a survey showed on Tuesday. Retail sales values slid by an annual 1.0 percent on a like-for-like basis, which strips out changes in store size, the British Retail Consortium (BRC) said, compared with a 1.9 percent rise in September. Another survey from payments company Barclaycard (BARC.L) also showed weak consumer spending, with a similar split between spending on essentials at the cost of spending on discretionary items. Last week, the Bank of England raised interest rates for the first time in more than 10 years.

FT: Dublin calls for 5-year Brexit transition period.  Coveney rails against ‘game of chicken’ as Irish concerns of collateral damage mount. Ireland has called for a transition period of up to five years after the UK leaves the EU in March 2019, in a sign of Dublin’s mounting concern that it will suffer collateral damage from Brexit. Simon Coveney, Irish foreign minister, also told the Financial Times in an interview that it was “not realistic” to agree a fully fledged UK-EU free-trade deal next year, even though Theresa May, Britain’s prime minister, has set out just such a goal.

News in Brief - 06/11/2017

GBP

Sterling had a relatively quiet day on Friday, failing to recover any significant portion of its losses incurred after last Thursday’s Bank of England interest rate announcement. The weekend’s political headlines included more scandal for the Conservative Party, and a fresh batch of document leaks on offshore tax structures, though nothing that’s liable to directly affect the value of the pound for now. This will be a somewhat slow week for sterling data, beginning with the British Retail Consortium’s Retail Sales Monitor in the early hours of tomorrow morning. Later in the week, Industrial and Construction Output data will be released on Friday.

EUR

EUR nudged down slightly on Friday on the back of a rather empty economic calendar. The ex-Catalan leader Carles Puigdemont turned himself in with the police in Brussels yesterday, only to be released later, as Spain’s constitutional crisis continues. This has already been a busy morning for the euro data calendar, with Services Purchasing Managers Indices across the eurozone printing slightly lower than expected in many instances, although the overall Eurozone Composite PMI beat expectations to rise slightly to 56.0. Sentix Investor Confidence will be released this morning at 10:30 GMT, followed by the Producer Price Index at 11:00 BST.

USD

USD has had an uneventful start to the week, with the weighted DXY index trading flat since midnight. Friday’s Non-Farm Payrolls report showed the economy adding less jobs last month than expected by forecasters, while wages were flat on the month. The unemployment rate did fall to just 4.1% however, although the lack of dramatic market reaction to the report illustrates the reduced importance of the report for USD at present, due to the tight labour market. Donald Trump’s state tour of Asia will continue this week, after a round of golf and a fist bump with Japanese Prime Minister Shinzo Abe – and some comments overnight criticising Japan’s trade policies that sent JPY to its lowest level against USD since March. New York Fed Chair Bill Dudley will speak today at 18:10 GMT.

UK News- 06/11/2017

FT: Oil price hits 2-year high as Saudi Arabia targets elite Crude rises after crown prince crackdown leads to arrests of royals, ministers and tycoons. Oil hit a fresh two-year high on Monday after the weekend arrests of at least 11 Saudi Arabian princes and dozens of senior officials and prominent businessmen by the country’s new anti-corruption commission. Brent crude was up 0.8 per cent at $62.55 a barrel on Monday – its highest level since July 2015 – as uncertainty over the situation in Riyadh added to other factors putting upward pressure on oil prices.

FT: Huge leak of documents reveals Queen’s offshore investments Wilbur Ross and Lord Ashcroft also feature in ‘Paradise Papers’. A huge leak of financial documents has revealed the offshore interests of hundreds of high-profile companies and individuals, including millions of pounds invested by the Queen’s private estate in a Cayman Islands fund. The revelations are the result of lengthy investigations by journalists across the world, who have examined 13.4m files belonging to professional services firms and offshore corporate registries. The BBC said there was nothing illegal in the investments and no suggestion that the Queen was not paying tax. But it said questions might be asked about whether the monarch should be investing offshore.

News in Brief - 03/11/2017

GBP

In spite of market speculation that the Bank of England would use its interest rate decision yesterday, and accompanying Inflation Report and Press Conference, to paint a bullish picture of the UK economy- in a bid to talk the pound up and stave off the inflationary effects of the weak pound on the UK economy- the reality proved very different. Upon release of the rate decision, inflation report, and meeting minutes, it became clear that the voting members from the Bank remain cautious about the economy’s growth prospects, and sterling immediately sold-off. BoE Governor Mark Carney’s press conference saw further losses, as he emphasised that the Bank would prefer to undershoot interest rate hikes, and potentially have to deal with the economy starting to overheat, rather than risking choking economic growth. Indeed, the Bank’s official forecast only see two more hikes in the next three years. Aside from this, yesterday also saw the release of the Construction Purchasing Managers Index, which showed a mild recovery from last month’s index, although optimism about future business remained dismal. This morning, Services PMI rose to 55.6, reflecting a decent rate of expansion in the sector and an improvement from August’s figures.

EUR

The euro closed marginally higher against the US dollar, and like all major currencies much higher against sterling . Political tensions in Spain remained elevated, as eight members of the Catalan government were taken into custody by the orders of the Spanish court of justice for their collaboration in organising the referendum that later led to the declaration of independence of the Catalan region. Spain issued a European arrest warrant for the Catalan leader Catalan Puidgemont as well, who is currently in Brussels and rumoured to be considering an asylum claim.

USD

The US dollar experienced a rather choppy session as markets tried to decide what to make of the details of the tax bill, released by the Republican party after much political wrangling. On the whole market participants appear to have been far from overwhelmed by the bill and it’s prospects for passage. The other big news coming from the US was the nomination of Jerome Powell by president Trump for the position of Fed chair. He is seen as the status quo candidate that will be much alike his predecessor Janet Yellen, who was perceived to be a cautious dove. This afternoon at 12:30 BST we will see the release of monthly Non-Farm payrolls and the change in Average Hourly Earnings, followed by the non-Manufacturing Purchasing Managers Index at 14:00.

UK News- 03/11/2017

FT: BoE’s Broadbent emphasises need for further rate rises. Ben Broadbent, deputy governor of the Bank of England, sought to reinforce the central bank’s message that it had not gone soft on future rate rises on Friday, saying “we will need a couple more interest rate rises”. Speaking on the BBC Today programme, the deputy governor fought against the financial markets’ impression that Thursday’s rate rise was “dovish”. Sterling fell more than 1 per cent against the dollar and the euro after the decision, when the BoE dropped its previous reference to markets underestimating the need for further interest rate rises. But officials in the central bank, both publicly and privately, said there had been no change in view and the reason that language was not needed was because the financial markets had taken notice of the BoE’s previous comments and finally priced in future interest rate rises.

Reuters: UK services sector grows at fastest rate in six months – IHS Markit/CIPS Britain’s services sector enjoyed a sharp pick-up in growth last month but companies were nervous about Brexit, a closely watched survey showed on Friday, a day after the Bank of England raised interest rates for the first time in a decade. The IHS Markit/CIPS services purchasing managers’ index (PMI) jumped to 55.6 in October from 53.6 in September, its highest level since April and its biggest one-month rise since. August 2016. The reading exceeded all forecasts in a Reuters poll and moved further above the 50 mark that separates growth from contraction. The services survey follows relatively upbeat PMI readings for the smaller manufacturing and construction sectors in October, and taken together they suggest the economy is growing at a quarterly rate of 0.5 percent, IHS Markit said.

News in Brief - 02/11/2017

GBP

Sterling volatility was low yesterday as markets braced for today’s all important Bank of England events. The Markit Manufacturing Purchasing Managers’ Index rose slightly in October, as the surveyed manufacturers reported higher activity and robust order growth. This morning, at 9:30am GMT we see the release of Construction data, however the markets main focus will be the Bank of England’s latest Inflation Report at 12:30pm GMT, alongside a rate decision that is likely to be the first hike in more than a decade. Expectations for the move are overwhelming after months of increasingly explicit messaging from Monetary Policy Committee members, and so the sterling reaction is likely to be driven by how hawkish or dovish the messaging accompanying the hike will be. MPC members including Governor Mark Carney will give a press conference at 13:30.

EUR

The euro traded lower against USD yesterday, but recovered its losses with some sharp appreciation versus the greenback overnight. After a lull yesterday the euro data calendar gets more eventful today. Eurozone Manufacturing PMIs have already been released this morning, with Italian, Spanish and German figures all positive, but French manufacturing below market expectations. The overall reading for the Eurozone was 58.5, with any number above 50.0 representing expansion.

USD

Sold off overnight as firm reports emerged that US President Donald Trump would choose Jerome Powell as the next Federal Reserve Chair, and the Fed itself held rates steady as universally expected at last night’s meeting. Powell is a conventional choice, and already a member of the Fed’s Board of Governors that is perceived as in favour of lighter regulation. Last night’s dollar weakness may have been triggered by an unwinding of expectations that a hawkish or unconventional pick may disrupt the Fed’s current, extremely cautious approach to rate hikes. Political wrangling continued in the legislature over a Republican Party plan for tax cuts, that will supposedly be released today and may be relevant for USD if it is viewed as inflationary. Aside from the potential announcement of tax reform plans. Weekly Unemployment Claims data will be released today at 12:30 GMT, alongside Nonfarm Productivity and Labour Costs data. Fortuitously, Jerome Powell himself will speak at 12:30.

UK News- 02/11/2017

FT: Trump set to name Powell as Fed chair nominee. President expected to make announcement on Thursday confirming choice of central bank head. Jay Powell is expected to be the president’s nominee to serve as the next chair of the Federal Reserve, according to two White House officials, as Donald Trump moves to make his mark on the world’s most powerful central bank. The White House is due to make the announcement on Thursday, ending months of speculation ahead of the end of Janet Yellen’s first term as chair in February. The post of Fed chair is subject to Senate confirmation. Mr Powell has been a serving Fed governor since 2012. A centrist on monetary policy, he is known as a pragmatic and down-to-earth official with private sector and government experience. A trained lawyer and former partner at private equity firm Carlyle, he also served in the Treasury under former president George H.W. Bush in the 1990s.

Reuters: Bank of England set to raise rates for first time since 2007. The Bank of England looks set to raise interest rates for the first time in more than 10 years on Thursday, despite economic growth appearing weaker than before any other increase in borrowing costs in the past 20 years. Almost all economists polled by Reuters expect the BoE to raise base rates to the 0.5 percent they stood at from March 2009 until August last year, when they were halved to 0.25 percent after Britons voted to leave the European Union. Britain’s annual growth is running at its weakest in four years, but with inflation hitting a five-year high of 3.0 percent in September and unemployment at a 42-year low, the central bank is worried the economy could overheat. “The time for beginning to edge up interest rates oh-so-cautiously from a quarter percent to a half percent is pretty nigh,” former BoE deputy governor Rachel Lomax said.

News in Brief - 01/11/2017

GBP

Plenty of political headlines dominated UK news yesterday, but the most significant for sterling was the news that lead EU Brexit Negotiator Michel Barnier was ready to speed up negotiations. Sterling crosses popped higher on the news, which arrived after midday, and extended their gains through the afternoon. The week’s key event remains tomorrow’s Bank of England meeting, and yesterday’s only major release was GfK consumer confidence, which remained negative overall. Today’s main data release will be the Manufacturing Purchasing Managers’ Index at 09:30 GMT, but with tomorrows potentially historic rate announcement looming the release may have a muted impact on sterling.

EUR

The euro had an uneventful day against USD, and weakened further to sterling. The morning’s data releases were a mixed bag, with eurozone Gross Domestic Product growth beating expectations for the second quarter, printing at 0.6%. Estimates of Q1 growth were also revised upwards, to 0.7%. The results underlined the impressive improvement in eurozone economic conditions this year, but inflation data released yesterday showed the lack of effect the growth increase has had in inflation. The Core Consumer Price Index rose just 0.9% year on year, a result typical of the last three years or so, and less than expected. No headline euro data will be released today, with many important economies enjoying All Saints day holidays.

USD

USD traded sideways in a broad sense yesterday, trading weaker against GBP and giving up early gains versus the euro. There were no developments in the week’s two headline political stories of the ongoing probe into the Trump administration’s potential involvement with foreign interference in last year’s elections, and the announcement of the next Federal Reserve Chair. The afternoon’s data included strong prints for the Chicago Purchasing Managers Index, a manufacturing output survey, and the CB Consumer Confidence Index, which spiked sharply in October. Today at 13:15 GMT ADP will release its monthly estimate of Non-Farm payrolls, followed at 15:00 by ISM Manufacturing PMI and Construction Spending. Total Vehicle Sales will also be released throughout the day, providing a partial but timely look at the health of consumer spending. At 19:00 GMT the Federal Reserve’s latest rate decision will be announced, although without a press conference to explain a potential rate hike, the Fed is likely to hold on rates tonight.

UK News- 01/11/2017

FT: US monetary tightening set to endure after Yellen. Fed chair will pass on most benign economic outlook America has seen for a decade. Janet Yellen will on Wednesday chair what may be one of her final meetings at the helm of the US Federal Reserve as the spotlight falls on whether monetary policy will shift after her expected departure. President Donald Trump is expected to nominate a replacement for Ms Yellen this week but the central bank’s slow but determined course towards tighter monetary policy seems set to endure, as Jay Powell, her most likely successor, inherits an established strategy and strengthening recovery. The next Fed chair will nevertheless be forced to face some significant decisions soon after taking the helm, including deciding how to combat the next economic downturn at a time of intense hostility among congressional Republicans to many of its stimulus tools.

Reuters: NIESR expects BoE rates to peak at 2 percent in 2021. Britain’s National Institute of Economic and Social Research said it expects the Bank of England to start a sustained rate-tightening cycle on Thursday, which will lead to interest rates peaking at 2 percent in 2021. NIESR’s forecast is more hawkish than almost all the economists polled by Reuters last week, and comes a day before economists expect the BoE to raise interest rates for the first time in more than a decade. Three months ago, NIESR brought forward its expectation for a first BoE rate rise to February 2018, at a time when most economists still expected the BoE to wait until 2019 before beginning to raise rates. In September the BoE surprised markets by saying most of its policymakers expected to back a rate rise “over the coming months”. BoE Governor Mark Carney said this largely reflected a weaker outlook for productivity – which has stagnated in Britain since the financial crisis and reduced the rate at which Britain’s economy can grow without creating excessive inflation.

 
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