‘Europe into a new era!’… paid for by the UK…
Headline UK retail sales rose to 0.3% for October, fractionally above forecast, and underlying sales growth of 0.1% also just beat expectations. The data eventually stimulated limited relief to Sterling but the annualised figure revealed a decline of 0.3% and annual growth for the latest three months was held at 1.1%. Food prices rose 3.5% over the year, the largest for four years which undermined purchasing power.
Bank of England Governor Carney stated that the majority of significant risks to the economy are borne of Brexit but that the bank will be sufficiently agile in controlling inflation and supporting the economy. Sterling gained on rumours that the UK government was willing to increase its Brexit divorce settlement. David Davis, the current Brexit Secretary, also stated that the EU and UK can go beyond the Canada trade model. There was also optimism from positive vibes surrounding today’s EU Summit meeting, which traders will focus on in the absence of any UK data releases.
The Euro declined to lows near 1.1225 while Sterling moved to two-week highs near 1.3240 on a generally weak US Dollar.
Yesterday, the US Dollar stabilized and was marginally higher against some of its major counterparts after industrial output rose more than expected in October as industries affected by the string of recent hurricanes resumed normal operations. Also, somewhat supporting the Buck, the Republican House voted for its tax reform bill. It is now the Senate’s turn now to pass its bill. Furthermore, it is worth recalling that both bills should reconcile at a later stage, thus paving the way for its implementation at some point by year-end.
This morning, the Greenback is under aggressive selling pressure based on the Wall Street Journal reports that Special Counsel Robert Mueller’s investigators have issued a subpoena to Trump’s election campaign for documents related to Russia.
Looking slightly further out, San Francisco Federal Reserve (Fed) head J.Williams said yesterday that a rate hike next month is ‘perfectly reasonable’, while Atlanta Fed R.Kaplan noted that diminishing unemployment should be a catalyst for extra tightening.
The Eurozone CPI yesterday read 1.4% y/y for October which was coupled with core inflation remaining unchanged at 0.9% y/y. This was followed by European Central Bank (ECB) chief economist Praet highlighting growth and inflation were not in sync with one another and insisted the bank must keep a level head and remain patient.
The Euro drifted lower throughout the day with risk appetite apparent and limiting the single currency’s potential demand. Lows of 1.1233 were seen against the Pound whilst the Dollar hovered around the 1.1770 level.
For the single currency today, ECB’s President Draghi will speak in Frankfurt with regards to “Europe into a New Era – How to Seize the Opportunities”. Investors and traders will be all ears for Draghi to deliver subtle hints regarding the future of his monetary policy and will certainly have the potential to spark volatility in the markets.
Data to Watch:
08:30 EUR ECB President Draghi’s Speech
13:00 EUR German Buba President Weidmann speech
13:30 USD Building Permits (MoM) (Oct)
13:30 USD Housing Starts (MoM) (Oct)
13:30 USD Building Permits Change (Oct)
13:30 USD Housing Starts Change (Oct)
17:00 USD Baker Hughes US Oil Rig Count