Trump says no-deal to the deal
The Pound gained some support from the latest opinion poll indicating a strong election lead for the Conservative Party, suggesting continuity and deal hopes. Sterling pushed to 1.1627 against the Euro and 1.2975 on the Dollar. The government stated that appointing a new Bank of England Governor would wait until after the general election (Dec 12th).
There was no great excitement caused by option expiries or month-end positioning, but after European closed President Trump’s reservations over the potential for a trade deal with the UK did weaken the Pound slightly. Overall, the Pound posted the sharpest monthly gain since May 2009, principally on the avoidance of a ‘no-deal’ Brexit. The Pound is edging up this morning, above 1.2950 against USD, despite expectations that UK manufacturing data will show continued contraction in October’s figures.
US jobless claims increased to 218,000 in the latest week from 213,000 previously. The core Personal Consumption Expenditure price index was unchanged for the September with the year-on-year rate at 1.7% from 1.8% and below the 2.0% Federal Reserve (Fed) target. The Chicago PMI index declined to 43.2 for October from 47.1 previously which was below consensus forecasts of 48.0 and the lowest reading since December 2015. The production index remained in contraction territory while new orders declined at the fastest pace since March 2009. The Chicago data triggered fresh unease over the US outlook.
The Dollar was also unsettled by speculation that the Federal Reserve would look to run the economy hot in order to lessen the potential deflation risks. There was a shift in Fed Funds future with the chances of a further cut at the December meeting increasing to just above 25%. US President Trump continued to attack the Federal Reserve over its interest rate policies. Dollar sentiment remained negative.
The Eurozone CPI inflation rate declined to 0.7% for October from a revised 0.8% previously which was in line with consensus forecasts while the core rate of 1.1% was slightly above expectations of 1.0%. German yields declined significantly on the day which undermined Euro support against the Dollar and it retreated from the highs of 1.1175.
The Euro retreated to near 1.1130 before recovering as sentiment around the Dollar remained negative. The Euro is currently traded above 1.1150 figure as we start Friday’s trading session with caution ahead of the US jobs report being released later today with consensus forecasts that Non-Farm Payrolls will come in around 90,000 after September’s 136,000 readings gain.
Data to watch
13.30 USD – Average Hourly Earnings
13.30 USD – Non-Farm Payrolls
13.30 USD – Unemployment Rate
15.00 USD – ISM Manufacturing PMI