Brexit Party offer Boris a boost
Amongst a raft of UK economic data the Q3 GDP growth printed at 0.3%, marginally below forecast but more significantly the UK avoids a technical recession. Year-on-year growth of 1.0% was also just below market expectations and business investment was unchanged on the quarter. Industrial production declined 0.3% in September with a 1.4% year-on-year decline as manufacturing output declined 1.8% over the year. The data had only a limited impact on the Pound as recession avoidance negated the mediocre data.
Just ahead of the US market open Sterling spiked as Nigel Farage of the Brexit Party announced his party would not contest Parliamentary seats won by the Conservatives in 2017. The Pound surged close to the 1.2900 area as the Conservatives election push faced less competition and therefore Brexit legislation could also face an easier ride through parliament. The gains faded later as the full implications, ie Brexit Party would still contest seats the Tories would hope to win, meant rising doubts there would be a significant impact on the parliamentary odds. Sterling retreated to near 1.2850 on the Dollar and the Euro pushed back from 6-month lows near 1.1682.
Volatility is lower this morning as the market awaits the UK ILO unemployment rate and Average Earnings figures.
Jitters surrounding the US-China trade front have re-emerged among investors in response to President Trump comments in past days, when stressed that he still made no decision regarding the rollover of part of the existing tariffs. These comments motivated investors to return to the safe havens and supported the fresh demand for gold and the Japanese yen among others.
Today, all the attention will be on the speech by President Trump at the Economic Club in New York, where he could unveil some fresh details regarding the progress of the ‘Phase One’ deal.
The Euro is still trading range bound around 1.1018 as we start the European session having faced a rejection on several attempts to regain the 1.1050 level. With the upside attempts capped by the Dollar recovery, the resurgence of the safe haven demand in the US-China trade deal concerns and the Hong Kong civil unrest aided the overnight recovery in the US currency.
Further on the Euro front, the inconclusion outcome of the Spanish general election combined with Eurozone economic growth worries continue to remains a negative. Downside, however remains capped amid expectations of an improvement in the German ZEW Survey, which is seen rebounding from -22.8 to -13.0 in November. Markets now await the German macro news and some clarity on the US-China trade front for fresh trading impetus while Trump’s speech later today could direct the next moves in the currency pair. .
Data to watch
09:30 – GBP – Average Earning Index
10.00 – EUR – German ZEW Economic Sentiment
10:30 – USD – FOMC Member Clarida Speaks
17:00 – USD – President Trump Speaks