Pound gains extended
The news that more than 40 Brexit Party candidates were withdrawing from the election, reducing competition for the Conservative Party, triggered a Sterling move above 1.2900 on the Dollar. The Pound failed to make much impact on the Euro. Futures market data recorded little change in Sterling bets and the latest opinion polls showed increased gains for the Tories.
Reports that Conservative candidates have all pledged support for the revised Brexit deal and seem likely to achieve a majority has added to Sterling support in the short-term. UK Foreign Minister Dominic Raab told the BBC “No … I don’t think it’s remotely likely.” when asked about the UK leaving without a deal. The Pound has strengthened to near 1.2950 on the Dollar this morning and 1.1700 on the Euro. Global risk conditions will be closely monitored this week.
US retail sales increased 0.3% for October, marginally above consensus forecasts of 0.2%, while core sales increased 0.2% compared with expectations of 0.4% while the control group met expectations at 0.3%. The New York Empire manufacturing index declined to 2.9 for November from 4.0 previously and below consensus forecasts. New orders remained in positive territory while unfilled orders contracted at a slower pace. Prices and employment indices were little changed as the labour market remained tight while confidence in the outlook strengthened slightly. October industrial production declined 0.8% compared with expectations of a 0.4% contraction as manufacturing contracted.
The data overall hampered dollar sentiment to some extent, especially with concerns over the impact of tariffs.
The Euro is building on last week’s recovery and sits nicely above the 1.1050 level, having hit weekly highs around the 1.1065 on mild Dollar weakness across the board. The common currency continues to keep the upper edge against its US counterpart for the third straight day as a lack of clear signals on a likely US-China trade deal combined with mixed US fundamentals continue to weigh on the US Treasury yields.
Eurozone October inflation came in as expected, up by 0.7% YoY and core CPI up by 1.1%, which supported the ongoing upbeat momentum in the common currency.
Looking ahead, a push towards the 1.1090 looks possible, should the recovery momentum extend but on the flip side, 1.1040 could guard the downside if the ECB speakers bolster dovish expectations. The US-China trade developments however, alongside Brexit negotiations, will continue to remain the main market drivers.