UK GDP estimates for July printed above forecasts, unchanged at 0.3% and the year -on year figure was also at 1.0%. Industrial and manufacturing production also beat forecasts at 0.1% and 0.3% respectively. Construction output data also beat forecasts. Bank of England MPC member Gertan Vlieghe stated that interest rates were likely to stay lower for years, although he also stated that it is unlikely that the bank would be able to cut rates as it did in the previous downturn.
Prime Minister Johnson stated that the government was still striving for a Brexit deal and speculation arose for a compromise on the Irish border issue which supported Sterling. After rising on the data releases, the Pound continued to gain as fears of No-Deal faded slightly. The Bill blocking an October 31st ‘no-deal’ outcome with a delay, became law. Sterling settled around 1.1170 on the Euro and just below 1.2350 on the Dollar. Prime Minister Johnson’s second attempt at calling a General Election was rejected by parliament making Johson’s record an unenviable 0/6. Welsh MP’s sang as parliament was suspended until October 14th. Today’s employment data, average earnings and jobless claimant count will garner more attention in the absence of political headlines.
It has been a rough beginning of September for the greenback with the US dollar index closing in the negative territory. Employment report missed market estimates on Friday sending the greenback lower against most G-10 currencies which didn’t help yesterdays trends for the buck.
The US Employment Trends Index was little changed at 110.6 from a downwardly-revised 110.7 the previous month, but there was no significant market impact. The New York Federal Reserve survey recorded a decline in consumer inflation expectations which will help the Fed justify a further cut in interest rates at next week’s policy meeting. The dollar retreated against commodity currencies and the Euro pushed to above 1.1050 at the European close, but failed to hold this level and traded near 1.1040 on Tuesday as narrow ranges continued to prevail.
The Euro continues to march higher amidst broad-based US dollar weakness. EUR/USD is trading 0.3% higher around the mid-point of 1.1050.
The Euro-zone Sentix investor confidence index recovered to -11.1 for September from -13.7 previously and above consensus forecasts. There was further speculation that the German government would boost fiscal policy to support the economy with increased investment to take advantage of extremely low borrowing costs. Any move to boost government spending and abandon fiscal restraint would boost confidence in the German outlook and also ease pressure on monetary policy. In response, the Euro gained ground with a slight net easing of Brexit fears also protecting the single currency.
Posted in Daily Market News on Sep 10 2019