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Sterling sinks further than Brexit lows

Sterling sinks further than Brexit lows

Yesterday heralded a quieter start to the week after Sterling’s “flash crash” on Friday. Conditions were generally calmer but Sterling sentiment remains poor. Fears of a ‘hard’ EU exit with no single market access is still the main downward pressure on the Pound and tough political rhetoric will continue to depress Sterling value.

The Euro was able to consolidate above the 1.1100 level against Sterling and the Dollar pushed below 1.2350. Overnight the latest BRC retail sales data recorded a 0.4% increase in the year to September from a 0.9% contraction previously, although the BRC also warned that Sterling weakness would put upward pressure on prices. Sterling dipped weaker again in the early hours of this morning.

German trade data showed a big improvement in exports after a slump in July, reinforcing confidence surrounding the industrial outlook, especially after Friday’s industrial production and factory orders data showed similar improvements. Eurozone Sentix investor confidence beat expectations for the third successive month, improving to 8.5 for October from 5.6 previously and German bund yields rose back above zero.

The US market was shut yesterday for Columbus Day; no economic data releases or payments. Working through the bank holiday, Chicago Fed President Evans stated that he “would be fine with a December rate hike” and that September’s employment data was pretty good, although he also cautioned that it might be better to allow inflation to rise closer to the 2% inflation target. Domestically, the US headlines have been centered on a Presidential candidate’s deplorable comment.

Data to watch: 10am Eur October ZEW Economic, German October ZEW Economic & Eur ZEW Current Situation. 3pm US Labour Market Conditions Index.

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