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Baby, it’s cold outside

Baby, it’s cold outside

UK industrial production remained unchanged on the monthly basis while rising 3.6% year-on-year in October. UK manufacturing output rose 0.1% month-on-month, rising 3.9% year-on-year in October, matching the market forecast.

Ahead of this week’s EU summit, Brexit remains in focus. Brexit secretary David Davis (who looks to have been superseded by Theresa May) stated the agreement on the Irish border “was much more a statement of intent” than a binding agreement. Michael Gove and Boris Johnson both want a clean split from the EU after they backed May’s deal. The comments highlight that even though the negotiations progressed, it’s too early for markets to discount a Brexit premium just yet. Despite talks likely moving to the transitional period and future relationship now, we do not know much about what that would look like at the moment. Sterling was a loser of the day on Friday after the UK-EU agreement turned out too fragile, with doubts over the trade agreement.

EURGBP fell from close to 1.1400 to 1.1360 at market open as markets absorb the latest mantra “a Brexit deal is not a trade deal”.


The US nonfarm payrolls report on Friday provided the Dollar strength as the economy added 228,000 jobs during the month, beating expectations. This caused Cable to fall, closing the week at 1.3385 whilst, against the Euro, a similar story as lows of 1.1734 were seen from intraday highs of 1.1770.

The payrolls report Friday sets a firm tone for Wednesday’s FOMC meeting where interest rates are expected to rise for the third time this year by 25 basis points to 1.5%. If this is the case, there is excitement surrounding the fact that the Fed’s hiking cycle is aligning with its scenario. This will give investors and traders confidence going forwards.

For the rest of the week, a quiet lead-up to Wednesday as this day brings the FOMC meeting and also inflation data which is followed by retail sales and import prices Thursday.


With no Tier one eco data today, Thursday’s European Central Bank (ECB) monetary policy meeting looms on the horizon. Given the announcement of changes to Asset Purchase last month, it’s highly unlikely there’ll be new action now. The ECB staff will update the macroeconomic forecasts, with 2020 forecast for the first time and hence will offer new information. The CPI 2020 forecast will be particularly important, with the market eager to see whether the inflation target of near but lower than 2% will be achieved. The 2019 forecast, in September, was 1.5%.
Recent data, since the September forecasts, suggest the staff may be tempted to revise their growth forecasts higher. This year’s was estimated at 2.2%, and it now looks closer to 2.5%. Next year’s growth was expected to be 1.8% and 1.7% in 2019.

Data To Watch:
17:00 USD 10-Year Note Auction

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