Today's Highlights

  • Brexit hampers Pound

  • US employment data boosts USD and chances of Federal Reserve rate hike

 

Current Market Overview

Sterling starts the week looking like an injured animal. It is limping along while The UK Prime Minister licks her wounds and the Brexit negotiations continue to dominate the news. Theresa May has told the EU, “the ball is in your court”, as members of her own party cause trouble from within and she is urged by some to distance herself from Boris Johnson, or Philip Hammond, or both. The Pound has a few other hurdles to get over this week. Data in the form of industrial and manufacturing production, the housing market survey from the Royal Institution of Chartered Surveyors (RICS) and the continued mosh pit of Brexit comment will all keep Sterling on tenterhooks. It would be a brave analyst who called the Pound’s direction this week, but, having fallen sharply over the last few trading sessions, some kind of muted recovery is a strong candidate.

Last week ended with positive US employment data. Notably, average wages rose by 2.9%; significantly above the Federal Reserve’s 2% inflation target. If disposable incomes are rising, then it opens the door for higher interest rates and that will strengthen the USD. On the other hand, the consortium of oil producing nations, the Organization of the Petroleum Exporting Countries (OPEC), is warning of extraordinary measures to stabilise supply and therefore the price of oil. OPEC used to be described as a cartel, but they don’t have the same stranglehold these days. Either way, we should be prepared for higher pump prices in the months ahead. That would weaken the USD and strengthen the currencies of the major oil exporting nations.

With the European Central Bank’s (ECB) October meeting looming, traders are starting to try to anticipate the impact of monetary tightening in the Eurozone. The ECB doesn’t meet until 26th October, but the markets are already worried that less cash in the European system will cause share market ructions that could offset any Euro gains. The data the ECB will have to consider this week includes industrial production and a smattering of inflation numbers. There are plenty of other minor data releases, but these will be the interesting ones.

For those with an interest in the Australian and New Zealand Dollars, we will get consumer and business sentiment from Australia and NZ over the next two days, but China’s trade balance data, due on Friday, is perhaps more influential. China is Australia’s number one export market and New Zealand’s number two market, with Australia being their number one. So China’s performance is very important to both countries.

It is the Columbus Day holiday in the US, so not much will happen after London closes at 17.30 GMT

 

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