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UK still spending as Tories lead narrows

UK still spending as Tories lead narrows

GBP UK consumer credit grew faster than forecast in October and net lending to individuals increased to £5.6bn; suggesting firm consumer spending. The 4 pm fix brought choppy conditions due to month-end and pre-weekend position taking. Sterling ended up back above 1.2900 on the Dollar, peaking near 1.2940 and the Euro settled near 1.1735. The terrorist attack in London terrorist added to political uncertainty and although most opinion polls still indicate a Conservative majority the lead was narrowing. Firmer global risk appetite is supporting the Pound this morning and it holds above 1.2900 on the Dollar and 1.1720 against the Euro.

EUR 

German unemployment declined 16,000 for November, which reversed last month increase and more. Headline Euro consumer inflation increased to 1.0%beating consensus forecasts of 0.8%. The core rate also edged above forecast with an increase to 1.3% from 1.1% raising hopes of a tentative recovery in Eurozone conditions. The Euro itself failed to gain on the data, especially with ECB nominees backing a very accommodative monetary policy over the medium term. By early afternoon the Euro dipped back below the key 1.1000 level, but closed modestly up on the day at 1.1020. 

Over the weekend, The German Social Democrat Party (SPD) new leaders resulted in defeat for the expected winner Scholz with a more left-wing joint leadership. This increased speculation that the coalition with Merkel would collapse or force a more expansionary fiscal policy. The Euro was unable to gain traction and settled around 1.1020 at the European open. 

USD 

The Dollar lost some ground during a shortened US trading session, mostly due to position adjustment. The Euro moved back above 1.1000 to trade with slight daily gains around 1.1020. Federal Reserve officials will be silent this week ahead of next week’s policy meeting, although there was further speculation that there would be a medium-term shift to allowing a higher inflation rate which may unsettle the Dollar. 

Data To Watch

 

08:15 – EUR – Spanish Manufacturing PMI

09:30 – GBP – Final Manufacturing PMI 

14:00 – EUR – ECB President Lagarde Speaks 

15:00 – USD – ISM Manufacturing PMI

 

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