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Sterling creeps higher

Sterling creeps higher

The first UK economic data in a week or so produced a mixed set of results. UK industrial production data for July fell short of expectations with a 0.1% increase, while manufacturing output also disappointed with a drop of 0.2%. In contrast, the monthly GDP data surprised with growth of 0.3% in July and NIESR estimated the 3-month increase of 0.6%. The trade deficit narrowed to £10.0bn and June’s figure was revised to £10.7bn.


Sterling crept higher after the GDP data, but again positive Brexit spin stole the headlines when the EU’s Michel Barnier stated that a deal was realistic within the next 6-8 weeks. Sterling spiked to 5-week highs just above 1.3050 against the Dollar, while the Euro dipped to 1-month lows below 1.1235. There were also reports that the EU would call an extraordinary Summit for November, raising speculation of an impending announcement.


Today we see UK jobs data and average earnings data taking precedence, due to the link with inflation, and therefore interest rate paths.




Italian bonds yields decline yet again, lending some early support for the Euro despite a drop in the Eurozone investor confidence index. The result was seemingly priced into the market. Against the Dollar, the Euro crept towards 1.1600 early on, after news from Barnier being positive. Dovish news from Draghi regarding the ECB meeting on Thursday, curtailed most of the momentum. However, this morning, the Euro is near the 1.1630 mark.


Data was very quiet yesterday, with the only real news being the investor confidence dropping from 14.7 to 12.0. Today is more busy with French nonfarm payrolls, UK average earnings, economic sentiment from Germany, and finally, Eurozone employment change. The majority of the volatility is expected to come from the UK and from the German news, at 9.30 and 10.00 respectively.




The US had a relatively quiet trading day. The sole data release; consumer credit growth for July beat consensus forecasts. The Dollar index edged lower on the day as US-German bond yield spreads narrowed slightly. The Euro consolidated just below 1.1600 late in US trading, amid some caution ahead of Thursday’s ECB policy.


Data to watch:

10:00    GER ZEW Survey – Current Situation (Sep)

10:00    GER ZEW Survey – Economic Sentiment (Sep)

10:00    GER ZEW Survey – Current Situation (Sep)

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