Home > Resource Hub > Daily Market News > Sterling Pauses After Recent Gains

Sterling Pauses After Recent Gains

Sterling Pauses After Recent Gains

GBP

Consumer confidence declined to 5-month low of -31 for October from -25 in September with consumers less confident over the outlook. Retail sales did increase however to 1.5% for October which came in above consensus forecasts. The CBI industrial trends index recovered to -34 for October from -48 previously and above consensus forecasts of -45 and output declined at the slowest rate since March, although there were still important reservations over the outlook and business confidence remained extremely fragile.

Chancellor Rishi Sunak announced further substantial changes to the job support scheme with a sharp cut in employer contributions with the government now contributing a much larger proportion. There were also fresh support measures in areas with tighter coronavirus reservations as upward pressure on spending continued.

With EU Chief Negotiator Michel Barnier arriving in London to resume Brexit negotiations, Sterling was looking quite vulnerable to a correction after sharp gains on Wednesday. The UK currency retreated to below 1.3100 against the Dollar and just short of the 1.1060 against the Euro.

 

USD

US jobless claims declined sharply to a 6-month low of 787,000 in the latest week from a revised 842,000 previously and below consensus forecasts of 860,000. Continuing claims also registered a sharp decline to 8.37mn from 9.40mn previously, although there was a small net increase in the number of pandemic compensation schemes. Existing home sales increased to an annual rate of 6.54mn for September from 5.98mn previously and above market expectations of 6.30mn. Elsewhere the Kansas City Federal Reserve (Fed) manufacturing index edged higher to 23 from 18 previously with some dollar support from the claims data.

There were further reservations over taking aggressive positions ahead of the US Presidential and Congressional elections.

The last Presidential election debate was a more civilised affair with more substance which may offer some net support to Trump’s ratings and markets will monitor opinion polls closely in the next few days. The stimulus developments will also continue to be important for risk appetite in the short term.

 

EUR

Eurozone consumer confidence declined to -15.5 for October from -13.9 previously and slightly weaker than expectations. 

The Euro is also facing selling pressure as investors start pricing in the possibility of an early Federal Reserve rate hike. The single currency against the Dollar currently trades around the 1.1805 mark, down from the high of 1.1880 reached on Wednesday.

There was also a surge in French coronavirus cases which further unsettled confidence alongside an underlying consolidation tone. Markets will watch the latest PMI business confidence data closely with a miss on expectation could see the Euro fall further.

 

Data to watch

08.15 EUR – French Flash Services PMI

08.30 EUR – German Flash Manufacturing PMI

08.30 EUR – German Flash Services PMI

09.30 GBP – Manufacturing & Services PMI

14.45 USD – Manufacturing PMI

Share this case study
Set yourself up in minutes, make payments the same day: it’s free, easy and without obligation.