Chinese Premier favours Football over Rugby, thankfully
The markets open with little change from yesterday as the focus for international markets remains split between economic developments in China and US Fed policy. Other than weak figures from China, which included a reduction in industrial production from 6.1% to 5.7%, all but confirming a slowdown, there wasn’t much to cause any notable shifts.
Yesterday, Sterling made some ground against the Dollar. The pair currently trades around 1.5495 (interbank) having been largely restricted to a range of 1.5410-1.5510 in the last few sessions. The likelihood of an upside breakout is high since the EUR/GBP sell-off could continue ahead of the Thursday’s European Central Bank (ECB) meeting. Furthermore, the UK domestic data – Retail sales and the British Retail Consortium’s strong sales report – due later this week could show that consumer spending continued to recover in September. The combined effect of strong UK data and the sell-off in the EUR/GBP would be enough to trigger an upside break from the GBPUSD trading range of 1.5410-1.5510. On the other hand, a downside breakout could be possible in case ECB’s Draghi disappoints, while US housing data manages to push up December rate hike bets.
Chinese President Xi Jinping starts his four day state visit to the UK and this could be a profitable meeting, barring any impromptu games of touch-rugby. From a Chinese perspective, they’d hope to improve their relationship with the UK and the EU. We’ve already heard of Chinese investment in the new Hinkley Point nuclear reactor and more infrastructure investment announcements are expected.
Bank of England (BoE) governor Mark Carney speaks this morning and we can only hope that he can provide some clarity on the thinking of the central bank and when a rate hike is likely to happen. Ian McCafferty, the sole BoE member that voted for a hike last month is also due to speak. McCafferty has made it clear he believes rates should be raised sooner, therefore allowing slower hike increments to minimise damage to the economic recovery.
On the data front, other than Carney speaking this morning, Fed members Powell, Dudley and Yellen will be speaking later. US housing stats is the only notable release.