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A matter of opinion

Sterling ignores soft data again

The end of last week was generally constructive for sterling despite more disappointing UK ecostats. It starts today an average of 0.4% above Thursday's opening levels and only the Northern Scandinavian crowns have done better. It is 0.7% higher on the week with no losses.

Thursday's retail sales figures for October followed the pattern set earlier in the week by UK statistics. They were weaker than forecast, with total sales falling 0.1% on the month and core sales, excluding fuel, down by 0.3%. Analysts had predicted increases of 0.2% in both cases. Although sterling did hesitate briefly the numbers did no lasting damage.

Investors' dissatisfaction with the UK ecostats was more than outweighed by their enthusiasm for the opinion polls, which point to a comfortable majority for the Conservative party at next month's general election. The accepted wisdom is that a majority Tory government would be able to deliver an orderly Brexit, which would be preferable in the short term to the uncertainty of the last three years.

Slow growth, low inflation

Euro zone data on Thursday and Friday did nothing to alter the impression that growth is sluggish and inflation is stubbornly low. The numbers were not bad enough to knock the euro back, though it was unchanged against the pound on Friday.

The preliminary gross domestic product data showed the euro zone economy growing 0.2% in the third quarter and employment rising by 0.1% over the three months. With consumer prices, the finalised numbers were closely in line with the provisional readings released a week ago. Headline inflation was unchanged at 0.7% while the core measure was steady at 1.1%.  

US retail sales went up by 0.3% in October, as did the control group. Overall sales were 3.1% more than the same month last year. The numbers were roughly in line with forecast, unlike the data for industrial production. Output was down by 0.8% in October, twice the expected decline. Investors were not unduly impressed and the US dollar lost an average of 0.2% on the day, giving up half a cent to sterling.

UK house prices lower

Rightmove's index of asking prices for residential property showed them falling 1.3% in November to a level 0.3% lower than a year ago. Coincidentally, the only other G7 statistic today is America's NAHB housing market index.

Rightmove reported that Brexit, the general election and weak price growth have discouraged people from moving house, such that the number of homes for sale has slumped 15% in a year. Rightmove's spokesman observed that "a Brexit deadline followed by a snap general election six weeks later is obviously a new combination for me and for many thousands of buyers and sellers".

This afternoon's NAHB index is expected to be unchanged at 71 and the US Treasury reports on international capital flows. And that is all until the NZ producer price indices come out tonight, followed by the Reserve Bank of Australia minutes.

GBP: Retail sales down, sterling up

GBP: Retail sales down, sterling up

EUR: Slow growth, low inflation

EUR: Slow growth, low inflation

USD: Retail sales match forecast

USD: Retail sales match forecast

AUD: RBA minutes tonight

AUD: RBA minutes tonight

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