Recent pressure eases off of GBP

The pound continued to claw back some recent losses yesterday gaining against both of its major peers, easing some of the pressure it has been under over recent weeks. There was no tier one data out to lend a helping hand, however, positive retail sales figures enabled the pound to grow in strength. The pound rallied as bullish UK retail sales figures were released with readings of 0.8% in the month of October, considerably higher than the market expectation for smaller sales growth of 0.3% following a fall of 0.4% in September. Year‐on‐year figures also came in positive with figures of 4.3% ‐ a huge uplift in the twelve months to October, surpassing the previous of 2.8%. Consumer spending has driven Britain’s economic recovery, dating back to mid‐2013, and is likely to remain the main engine as there is a lack of demand for exports due to the slowdown in the eurozone. The Office of National Statistics mentioned the fact that furniture sales were a big driver in October ‐ perhaps reflecting a six month lag between purchases of household goods and the number of mortgage approvals and house purchases which were both growing at a rapid pace earlier in the year.

As the European session opened yesterday, the euro came under significant pressure following the release of manufacturing, services and composite PMI readings. The entire initial estimates from France, Germany and the eurozone as a whole came in below the forecast levels. In addition, many of the readings showed a decline from last month's figures. German Manufacturing PMI slumped from 51.4 to 50.0, on the brink of contraction, the euro then suffered further when the German PMI readings also fell from 54.5 to 52.1 in November. When ECB president Draghi speaks this morning, it is more than likely there will be few surprises. However, any negative comments regarding the current situation of the euro and its struggles could see further pressure inflicted. We expect his stance to remain consistent with previous speeches with his “whatever it takes” attitude.

Stateside, we saw Consumer Price Index figures released with a positive reading of 1.7%. Marginally higher than the consensus reading of 1.6%, the figure fell in‐line with October’s reading this time last year. Plunging petrol costs offset increases in housing, medical and airline fares. Meanwhile, food prices were up just 0.1%. When the two volatile components of the consumer price index, food and energy, are stripped out, core prices were up 0.2% in the month, and 1.8% year‐on‐year. Initial jobless claims figures came in negative, with readings of 291,000 in the week ending November 15, against the 285k consensus. However, continuing jobless claims were more bullish with figures showing 2.330m against the 2.370m expectation. The Greenback continued to grow in strength when Philadelphia Fed manufacturing figures were released with the highest reading since December 1993 at 40.8. Market participants expected a reading of 18.5, which would have been down slightly from last month’s 20.7 reading. There was also a significant increase in reported hours worked, with the average work week index rising from ‐1.3 to 7.8 this month. The survey's future indicators also suggest optimism for future growth, with nearly 60% of the firms surveyed expecting increases in activity over the next six months, with just 2% of firms expecting decreases over that period.