Sterling Climbs as Data Supports Hike
October 10th: Highlights
- Retail Sales show consumer still active
- Brexit deadlock unchanged
- May planning for Hard Brexit with no deal
Pound Finds support
The June MPC meeting came close to hiking rates but headline inflation fell back from 2.9% to 2.6% and it is probable that Governor Mark Carney is hoping for a similar result when the data is released next week.
Overnight, like for like retail sales data was released by the British Retail Consortium and the numbers were surprisingly strong, growing 1.9% year on year in September versus 1.3% last month. This will provide further encouragement to the market as support from the consumer is vital with wage growth stalling.
The pound managed to claw back some of the losses it suffered last week finding support around the 1.3000 level versus the dollar and gaining half a percent versus the single currency to reach 0.8937
Brexit talks begin with no new developments
From a U.K. perspective it is entirely reasonable to know how beneficial the relationship will be before committing to a continuing major investment. The EU want to make sure that they do two things; continue to receive payments they feel the U.K. is legally and morally required to make and to illustrate to any other waverers the tough stance they will take should there be another leave referendum in the region.
The fifth round of talks began yesterday although with no fresh impetus, there is little for the Michel Barnier or David Davis to say. It is doubtful that the hard line being adopted by Paris and Berlin will have seen as helpful by either side but it does illustrate perfectly the vie, whether fact or fiction, that the EU feels it is better placed to deal with life without the U.K, than the other way around.
May briefs Parliament amid continued infighting
Following her speech yesterday, the Government was accused by the opposition of wasting months of talks although it is difficult to see how progress can be made when the two sides are diametrically opposed on the most basic of issues. In truth it was unreasonable for the EU to place the three minimum expectations before the U.K before it had even a basic knowledge of what the U.K.’s position was. It was always going to impossible for a monetary figure to be placed on the table when neither side knew what the outcome of the negotiations could be.
Traders have become immune to the continued stalemate and have turned their attention to more tangible drivers like monetary policy although, for now, the outlook looks just as hazy!
Have a great day!
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”