UK banks scrape through
Sterling held steady yesterday with support initially coming from news Big Pharma is making major inward investment. The UK government stated that it was committed to avoiding any physical barrier at the Northern Ireland border, although the issue can only really be solved during the trade talk stage of Brexit negotiations.
Sterling pushed to two-month highs around 1.3380 against the Dollar whilst it floated almost lifelessly around the 1.1173 level against the Euro.
Brexit developments will continue to be watched closely given the EU’s December 4th deadline for key concessions. The Bank of England financial stability report revealed that no bank in Britain needs to strengthen its capital position as a result of the tests, a first since the tests began in 2014. The fact high street banks can withstand a disorderly or hard Brexit should shore up Sterling sentiment until the consumer credit report hits.
The Dollar, overall, remained firmly on the defensive ahead of the New York open with the Euro pushing to fresh two-month highs above 1.1950. US new home sales data smashed expectations with a 6.2% gain to an annualised figure of 685,000, the strongest figure since October 2007. Median prices rose 3.3% over the year while the supply of homes fell to the lowest reading since July 2016 as sales gained strongly in the South.
Dallas Fed President Kaplan sounded more hawkish overall and maintained his call for a near-term increase in interest rates. He saw the jobs market as increasingly overheated and didn’t want the Fed to be behind the curve. Fed Governor Powell’s congressional hearings for the post of Chair will be an important market factor on Tuesday and, in prepared remarks, he commented that the gradual tightening of monetary policy should continue. New York Fed President Dudley stated that he was not concerned that inflation is a little below the 2% target and that the economy is pretty much at full employment. The Fed rhetoric, overall, was a little more hawkish which provided some Dollar support.
German Chancellor Merkel and SPD leader Schulz are due to hold talks on Thursday with Schulz stating that all options are on the table. Speculation over a resolution provided some net Euro support.
Data To Watch:
00:00 USD Fed’s William Dudley speech
07:00 GBP Bank Stress Test Results
07:00 GBP Financial Stability Report
07:30 GBP BOE’s Governor Carney speech
12:00 EUR Gfk Consumer Confidence Survey (Dec)
14:00 USD S&P/Case-Shiller Home Price Indices (YoY) (Sep)
14:00 USD Housing Price Index (MoM) (Sep)
14:15 USD FOMC Member Powell Speech
14:15 USD Fed’s William Dudley speech
15:15 USD FOMC Member Harker Speech
20:45 USD Treasury Sec Mnuchin Speech