Sterling edges higher on US Dollar for fifth straight day

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17 November 2017


Thursday’s better-than-expected retail sales data was enough to lift the Pound back above the 1.32 level against the US Dollar yesterday, while also finishing the session higher on the Euro.

ales increased 0.3% in the month to October after investors had eyed a 0.1% increase, although year-on-year sales did drop for the first time since 2013. The drop in sales on last October was largely driven by the recent sharp increase in consumer prices that has seen inflation jump well above the Bank of England’s 2% target level.

BoE Governor Mark Carney didn’t touch on monetary policy during his appearance on Thursday, although did comment on the topic of Brexit. Carney said that Brexit presented some of the most important risks to the UK and that it matters both what deal the UK gets and when it gets it. He also claimed that the central bank would be nimble enough to control domestic inflation, while supporting the economy. Deputy Governor Ben Broadbent also added that a lack of productivity growth was weighing on growth, although investors mostly overlooked their comments in favour of the stronger than forecast economic data.

Announcements in the UK are thin on the ground today, meaning that Sterling will likely be driven by events elsewhere.

FOMC member Mester talks up interest rate hike chances

The Dollar index was little moved yesterday in the absence of any significant pieces of economic or political news.

The greenback received some modest support from comments by Federal Reserve member Loretta Mester. Mester said that she thought inflation in the US was poised to pick up in the coming months and would pave the way for the ‘gradual process of raising interest rates’. This continues to support the view that the FOMC will raise rates again next month and on at least three occasions in 2018.

Second tier housing data this afternoon are unlikely to rock the boat. USD traders will have one eye on the release of next Wednesday’s Federal Reserve meeting minutes for clues as to likelihood of another US interest rate hike in December.

Eurozone inflation remains unrevised for October

The single currency spent much of London trading within a fairly narrow band against the US Dollar on Thursday, ending the session only modestly lower. Updated inflation data for October was unchanged from the preliminary estimate with consumer prices confirmed to have increased by 1.4% in the year to October, still well below the ECB’s ‘close to, but below’ 2% target level.

President of the European Central Bank Mario Draghi will be making a keynote speech at a European Banking congress in Frankfurt this morning.