UK data reports this week are limited, with house prices and IP mainly, but the Halifax house price data reported a marginally stronger-than-expected 0.3% increase in prices for October, and a 4.5% rise in the year, taking price appreciation back to the levels seen around the start of the year. The main focus for UK markets this week is the restart of Brexit discussions on Thursday. Sterling was resilient throughout yesterday despite a fresh decline in UK bond yields as the recent strength in oil prices continued to provide net support.
Moreover, optimism over Brexit negotiations, following the UK Prime Minister Theresa May's overnight comments, now seems to have receded, with resurgent USD demand exerting some fresh selling pressure and turning out to be an exclusive driver of the pair's downslide. Brexit concerns remain poised to drive the sentiment around Sterling in the months to come, while the Bank of England (BoE) is expected to keep the monetary status quo unchanged at least to mid-2018.
Sterling, overall, found support close to 1.3100 against the Dollar before a recovery back to the 1.3170 area while the Euro continued to test the 1.1360 area. Sterling demand faded slightly this morning with a retreat in oil prices and underlying uncertainty surrounding the political situation ahead of the next round of Brexit talks limiting support.
Despite the ongoing upward trend, the Greenback should stay vigilant based on the headlines coming from the US political scene, particularly those regarding Trump’s tax reform proposal, which is now facing some internal conflicts among Republicans and faces strong opposition from Democrats.
IBD consumer confidence index came in above estimates at 53.6, while JOLTs job openings also beat consensus in September at 6.093 million. There were no comments on monetary policy from Fed Chair Janet Yellen and no nomination for vice chair.
Mostly positive US macro data released late last week added to market expectations for December Fed rate hike action, which, coupled with a modest pickup in the US Treasury bond yields, reignited the US Dollar rally on Tuesday.
There are growing concerns for the Euro that the European Central Bank’s (ECB) decision last week to prolong the asset purchase programme will have a detrimental impact for the Euro. To add to this, German industrial production missed the expected drop of 0.7% and instead declined by 1.6% for September.
There was respite, however, for the Euro as retail sales beat expectations, coming in at 0.7% for September. This, however, failed to spark the market and Draghi’s speech complemented the programme as it placed banks in a strong position, despite shares in the Italian banking sector falling as their debt continues to rise. German bund yields continued to move lower during the day which sapped Euro support.
During the European session, there were reports that ECB board members Weidmann, Coeure, and Villeroy opposed recommendations of chief economist Praet at the October meeting and wanted to tie overall monetary stimulus to the outlook for prices rather than the narrower focus on bond purchases. There was insufficient support within the council, but divisions will intensify if Eurozone growth accelerates further.
Today for the Euro, the six-week cycle for the ECB non-monetary policy meeting will take place.
Data To Watch:
08:00 EUR Non-monetary policy's ECB meeting
15:30 USD EIA Crude Oil Stocks change (Nov 3)
18:00 USD 10-Year Note Auction
Posted in Daily Market News on Nov 8 2017
GBP Sterling received some support yesterday after UK benchmark bond yields declined less than German bond yields with overall spreads peaking at fresh 10-year highs. Further sharp gains in oil prices, caused by an anti-corruption purge in Saudi Arabia, also provided net support to the Pound during the day after...VIEW FULL ARTICLE
Posted in Daily Market News on Nov 7 2017 by Rob Affleck