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Cable high, Christmas is nigh

Cable high, Christmas is nigh

GBP
GfK Group Consumer Confidence nudged down further to -12 from -10 and House Price inflation stalled in November. However, the markets ignored this in favour of pricing in optimism from rumours emanating from a senior EU official that Brexit negotiations will move to the next stage before year-end. And with that comes the faint hope that we’re a little closer to not having to mention Brexit every day.

The GBPUSD pair reached a fresh two-month high of 1.3548, before retreating but still banking solid gains for a third consecutive day. Optimism surrounding agreement over the Irish border issue helped the Pound higher, although it’s still unclear as the DUP suggested they will withdraw support to Theresa May if she gives away too much.

Cable hit a recent high of 1.3653 in September, a possible bullish target for the current upward movement, particularly if the advance extends beyond the mentioned daily high and macroeconomic data comes in-line with the trend. The Pound also seems strongly supported at 1.1300 against the Euro. Today’s UK November Markit manufacturing PMI is forecast to show solid growth.

USD

Throughout this week for the Dollar, a large part of the currency’s sentiment has been governed by politics. The biggest focus on this front has been Donald Trump’s Tax reform which failed to pass through the Senate yesterday but could pass today. This campaign received a boost, however, this morning as Senator John McCain stated he was in favour and would vote for the plan.

Reports have arisen that Trump is now considering ousting Secretary of State Rex Tillerson for CIA Director Mike Pompeo who has called for a more stern response to threats in North Korea.

On the data front, US personal income and personal spending both beat expectations with a rise to 0.4% m/m and 0.3% m/m rise respectively. Core Personal Consumption Expenditure (PCE) remained at 1.4% y/y whilst the PCE price index beat expectations to fall only 0.1% y/y to 1.6%. Finally, the week ending Nov 24th, US initial jobless claims strengthened to 238k.

Regarding data out today, ISM PMI manufacturing is expected to decelerate in November with prices sub-index following suit with a deceleration expected. Further, Philadelphia Fed President Patrick Harker is expected to address “Inclusive Economic Growth” in a speech.

EUR

There was some important data out yesterday for the Euro as German retail sales fell -1.2% m/m in October and 1.4% over the year. The Eurozone’s Core Consumer Price Index (CPI) also did not meet expectations of a rise and instead remained at 0.9% y/y with CPI y/y only rising slightly to 1.5% when 1.6% was expected.

More specific Eurozone data fields had French CPI increasing 0.1% m/m in November, rising 1.3% y/y and Spanish GDP in-line with expectations and increasing to 3.1% y/y in Q3. Finally, Italian CPI missed the mark and fell -0.2% m/m while rising a mere 0.9% y/y in November when a 1.0% increase was expected.

European Central Bank (ECB) Board member and chief economist Peter Praet, in a speech yesterday, said that there are other factors outside the monetary policy that should be considered as this is not “the only game in town”.

Data To Watch:
08:55 EUR Markit Manufacturing PMI (Nov)
09:00 EUR Markit Manufacturing PMI (Nov)
09:30 GBP Markit Manufacturing PMI (Nov)
14:05 USD Fed’s Bullard speech
14:30 USD FOMC Member Kaplan Speech
14:45 USD Markit Manufacturing PMI (Nov)
15:00 USD ISM Manufacturing PMI (Nov)
15:00 USD ISM Prices Paid (Nov)
15:00 USD Construction Spending (MoM) (Oct)
15:15 USD FOMC Member Harker Speech
17:00 USD Baker Hughes US Oil Rig Count

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