On Friday UK GDP numbers showed that growth in the UK had slowed down to just 0.1% by September, which has had an instant negative impact on Sterling exchange rates. What this release has shown is that the actions taken in the latest budget will now most definitely have an adverse effect on the UK economy, tax hikes will only slow down the economy further and hit UK businesses, many are now expecting a roll back on some of these policies to try and boost the UK economy again before things get too bleak, so it will be worth keeping an eye on this for a potential Sterling reversal. In my last report I mentioned that the BoE were not expecting another rate cut until February, however, due to this GDP data many analysts are now increasing the odds on a December cut as the data release undershot any BoE forecasts- this is another reason why the Pound is weaker.
This week, we have a few data releases of note with a few ECB & Fed speeches, the most notable being Christine Laggarde’s speech at 6:30pm, given the issues in Germany currently, it will be interesting to see thee ECB’s stance on monetary policy in response to it, the Fed speeches should reiterate the current Fed stance on a rate cut for December. Aside from these, there are no economic data releases that should affect the market.
On Tuesday we have EUR inflation data where we are expecting the YoY number to land at 2%, exactly the ECB’s target, which shows that the current stance by the ECB is working and controlling inflation, we also have CAD inflation data coming out which is expecting to land just under 2%, this may mean we see Canada hold on their rates for the here and now and assess what their economy does next.
On Wednesday we have UK inflation data where we are expecting core inflation land at 3.2% and YoY inflation to rise to 2.2%, this will also be followed by the UK retail price index rising to an expected 3.5%, demand has been stronger in the UK so inflation has risen a little, however with current Tax hikes expected we may see this trend continue, so the market will be waiting for commentary from the BoE and the Government on what to do next in regards to fiscal and monetary policy.
On Thursday the main release is U.S jobless claims, we are expecting a slightly higher number but as we move into the end of November, concentration will now be on Decembers NFP number before President Trump is inaugurated in January- the Fed is expected to cut rates in December either way so we shouldn’t see too much movement on the markets on this release. Lastly, on Friday we have UK retail sales which is expected to come in at -0.3%, which is in line with what GDP numbers showed us, so this may weaken the Pound, we also have GDP numbers out of Germany showing growth of only 0.2% in the last quarter which is negative for the Euro. We also have flash PMI’s for Europe, UK and the U.S which will give us an idea of services and manufacturing activity- if there are any shocks on these releases we could see some movement on the market.