Sterling recovers after labour report, BoE’s Carney to speak today

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16 November 2017


The Pound edged modestly higher against its major peers this morning after the latest set of retail sales data provided reason to be optimistic over the health of the UK economy.

eadline sales unexpectedly increased 0.3% in October following a revised 0.7% contraction the month previous. Sterling had ended London trading mostly flat on Wednesday, recovering from a relatively modest sell-off after the releases of yesterday morning’s labour report.

The report itself was actually fairly encouraging and the negative reaction in Sterling was somewhat of a confusing one. Average earnings growth excluding bonus came in at a better-than-expected 2.2% in September, while the previous month’s number was also revised upwards to 2.3%. Unemployment came in unchanged at its four decade low 4.3%, although actually declined in real terms by 59,000.

Bank of England member Ben Broadbent struck a fairly hawkish tone during his speech yesterday, raising hopes that the central bank in the UK could hike interest rates on at least one occasion in 2018. Broadbent, deputy Governor at the BoE, claimed that Brexit does not necessarily imply low interest rates, while saying that low unemployment in the UK would boost wage growth.

In a busy week of announces in the UK, Bank of England members Carney, Cunliffe and Broadbent will also all be speaking at a Future Forum in Liverpool this morning.

US core inflation increases for first time since January

The greenback pared its losses for the day on Wednesday afternoon after the latest inflation data showed that core consumer price growth unexpectedly accelerated in October. Core inflation rose back to 1.8% in October from a previous 1.7%, the first time the gauge has increased since January.

Retail sales data was contrastingly mixed. Sales increased by 0.2% in the month to October after investors had eyed a flat reading, while there was also a welcome upward revision in the previous month’s number to 1.9%. Excluding autos sales, however, came in at just 0.1%, suggesting that consumer spending in the US was relatively soft at the beginning of the fourth quarter.

A string of speeches from a number of Federal Reserve members today could all shift the greenback. Industrial production data could also receive some attention.

Single currency retreats from three week high

Despite rallying to its highest position in three weeks early yesterday afternoon, the Euro faded as the day progressed to end London trading where it began versus the USD. The downward move in the common currency was not necessary driven by any fundamental news and can be attributed largely to technical factors. Other than an increase in the Eurozone trade surplus to 25 billion Euros, economic data yesterday was fairly limited.

The latest Eurozone inflation data this morning for October is expected to remain unrevised from the previous estimate. ECB Vice President Vitor Constancio will also be speaking this evening.