UK fears no-deal fallback
UK Retail Sales printed well below consensus forecasts, with core retail sales contracting 0.8% since August. The annualised figure printed well below the forecast of 3.7% at 3.2% for September, however, the August figures were revised higher. The data had little overall market impact as attention was focused on political developments.
Government sources continued to suggest that Theresa May would consider lengthening the Brexit transition phase and the EU’s Jean-Claude Juncker stated that he expected as much. A negative domestic reaction to the suggestion triggered more domestic political tensions, giving rise to major doubts that a solution was possible and rumours that the UK feared that the EU will fallback to a ‘no-deal’ outcome. Sterling also suffered from a drop in global risk appetite. The Euro pushed back to the 1.1360 area and the Dollar climbed to near 1.3000 after the European markets shut. The only economic data slated is Public Sector Net Borrowing figures and at 5pm Mark Carney speaks.
US weekly jobless claims declined slightly to 210,000 and continuing jobless claims declined to the lowest level since August 1973. The Philadelphia Fed index declined slightly but still printed above consensus forecasts. The Fed’s James Bullard reiterated that interest rates were at the right level and did not need to increase, but markets still expect the Fed to maintain a hawkish stance and potentially raise rates more aggressively in 2019. The data supported expectations of net US capital inflows and the Dollar climbed to near 1.1450 against the Euro amidst criticism of the Italian budget.
Uncertainty over the Brexit negotiations curbed any growth the single currency made on Thursday. German and Italian bond yields drifted lower which also played its part in EURUSD dropping below the 1.15 mark.
The Italian budget was also a source of contention within the EU, providing a steady stream of negative headlines. Italy, it seems, is on a direct collision course with the EU with both sides not willing to concede any ground. European Central Bank (ECB) President Draghi warned Italy against breaking the rules and EU Commissioner Moskovici started the first formal step in rejecting the budget by writing a letter to Italy.
There is virtually no data to come out today aside from Bank of England Governor Carney’s speech this evening. Of course, the Brexit Summit is set to continue which, as always, will be of keen interest.
Data to Watch:
02:00 CNY NBS Press Conference
02:00 CNY Industrial Production (YoY) (Sep)
02:00 CNY Retail Sales (YoY) (Sep)
06:35 JPY Bank of Japan Governor Kuroda Speech
08:30 GBP Public Sector Net Borrowing (Sep)
12:30 CAD Retail Sales ex Autos (MoM) (Aug)
12:30 CAD Retail Sales (MoM) (Aug)
12:30 CAD Consumer Price Index (YoY) (Sep)
12:30 CAD Consumer Price Index – Core (MoM) (Sep)
12:30 CAD Bank of Canada Consumer Price Index Core (YoY) (Sep)
12:30 CAD Bank of Canada Consumer Price Index Core (MoM) (Sep)
12:30 CAD Consumer Price Index (MoM) (Sep)
13:00 USD FOMC Member Kaplan Speech
14:00 USD Existing Home Sales (MoM) (Sep)
16:00 USD FOMC Member Bostic speech
16:10 GBP BOE’s Governor Carney speech
17:00 USD Baker Hughes US Oil Rig Count