Sterling rise constrained by borders
Sterling flew out of the traps on the release of the UK retail sales data. Sales volumes increased 0.3% in August, significantly above the forecasted decline of 0.1%. Annual growth printed at 3.3%, with July’s figure revised up to 3.8%. The Pound moved sharply higher, peaking near 1.3300 against a fragile Dollar, and pushing the Euro back to 1.1295.
There was a barrage of Brexit-related comments from UK and EU officials, notably Theresa May, stating that the Irish “backstop” would not be ready in time for October. European Council President Donald Tusk was more optimistic that a deal would be made, although part of the Chequers deal would not work. Despite tough rhetoric from EU leaders, Sterling was broadly resilient on expectations that a deal would eventually be secured.
The Euro recovered to the 1.1270 area amid wider gains and the Pound recovered to around 1.3270 after falling back to near 1.3230 overnight.
Yesterday the Euro jumped to a two-month high of 1.1780 against the Dollar, but it’s initial gains were curbed slightly by the Italian 5-Star parliamentary leader DiMaio stating that if spending demands were not met, his party would leave the coalition. This pushed the Euro back to below the 1.1750 level, but the Dollar had a tough day and the single currency had a resurgence later on.
Data was scarce yesterday, but today sees the release of Markit Services and Markit Manufacturing PMI out of France, Germany, then the EU. Some volatility is expected, but, in the same fashion as the rest of the week, today is a quiet day on the data front.
The Dollar came under heavy pressure whereby the US currency index declined to 9-week lows before some respite after firm domestic data.
Initial jobless claims declined to 201,000 in the latest week from 204,000 and the lowest level since November 1969. The Philadelphia Fed manufacturing index strengthened to 22.9 for September from 11.9 previously, with robust readings for orders and employment.
Companies also remain generally optimistic surrounding the 6-month outlook, with solid readings across all categories.
Across the Atlantic, Markit will publish its flash gauges of the Services and Manufacturing PMIs.
Data to watch
07:30 EUR Markit PMI Composite (Sep)
07:30 EUR Markit Manufacturing PMI (Sep)
07:30 EUR Markit Services PMI (Sep)
08:00 EUR Markit Services PMI (Sep)
08:00 EUR Markit Manufacturing PMI (Sep)
08:00 EUR Markit PMI Composite (Sep)
08:30 GBP Public Sector Net Borrowing (Aug)
13:45 USD Markit PMI Composite (Sep)
13:45 USD Markit Services PMI (Sep)
17:00 USD Baker Hughes US Oil Rig Count