Hold onto your hats, it’s month end
Andy Haldane, the BoE’s Chief Economist stated that there was no slack in the UK economy if growth continued at the current pace, further interest rate increases would be necessary. Brexit tensions persisted ahead of next week’s Tory party conference and EU officials confirmed that the EU is prepared for any Brexit scenario.
The spectre of month-end selling largely held Sterling back, but the Euro still registered losses as it moved above 1.1235 before settling. The Pound failed to hold above 1.3100, after European market hours as Dollar strength persisted. Although UK consumer confidence dipped in the latest release, there was a recovery in the Lloyds business barometer. Markets are expecting choppy trading today, caused by the UK Q2 GDP data accompanied by month-end positioning and political tensions.
Concerns surrounding the Italian budget situation, combined with sustained rumours that Italian Finance Minister Tria will resign made the Euro weaken significantly on Thursday. The opposition leader Di Maio called for higher spending limits which only added to the uncertainty.
German inflation unexpectedly increased to 2.2% YoY and the EU economic sentiment indicator came in below consensus. After the European close the Italian government proposed a budget deficit of 2.4%, going against the suggestion of Minister Tria’s 2% figure meaning the Euro dipped to 1.1635 against the dollar.
Eurozone inflation data is out today, with CPI and GDP figures out of Spain and Italy, unemployment rates out of Germany and GDP figures out of the UK. Most interest will be around the EU’s CPI and core CPI numbers as well as Praet’s speech just after lunch.
The USD showed strength relative to a basket of currencies yesterday after the UNGA meetings in New York. The dollar gained overall strength from Fed Chair Powell’s hawkish tone and the Euro dipped below the 1.1700 level.
Headline US durable goods orders increased by 4.5% for August following a revised 1.2% decline the previous month. The core data was less impressive with a 0.1% monthly gain with the headline gain driven by aircraft orders, although there was still a 8.2% annual core increase. Initial jobless claims increased slightly to 214,000.