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Daily Brief


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Light in the tunnel

Two on the bounce

It is probably not a record, but on Friday, for a sixth consecutive day, sterling continued its run of being either the best or worst performer among the major currencies. In this case, it took first place, with two-month highs against most of its peers.

Two things contributed to the pound’s success; the UK economic data and an upbeat assessment of the Brexit negotiations. Whilst it would be silly to say the public sector borrowing numbers were good, the £22.3 billion borrowed in October – a record for the month – was eight billion less than analysts had feared. Retail sales for the same month were also better than expected, up 1.2% on the month and 5.8% on the year.

With Brexit, investors had already been encouraged by the silence of Number 10 on the matter, the inference being that, not for the first time, the talks had entered “the tunnel” of silence and a result was therefore at hand. European Commission President Ursula von der Leyen stoked that belief when she said that "we have seen...better process. Although “there are still quite some metres [yards] to the finish line”, it was the most positive official EU comment for a while. The GBP strengthened by an average of 0.3%, taking half a cent each off the USD, the EUR and the CHF.


Retail sales

Close behind sterling, the antipodean dollars were the best of the rest, just a dozen ticks off the pace. The SEK came last, narrowly behind the EUR, CHF and CAD, through no fault of its own. Better-than-expected retail sales data from Australia, Canada, and New Zealand had no discernible effect on their currencies.

Australian retail sales increased by a provisional 1.6% in October, compensating for September’s 1.1% decline but leaving August’s 4% fall almost untouched. Retail sales in Canada went up by 1.1% in September, marking a fifth consecutive monthly increase. Last night’s retail sales data from New Zealand revealed a 24.1% rebound in the third quarter after a 14.8% plunge in Q2.

Friday’s few other ecostats showed Swedish capacity utilisation increasing by 4.4% in Q3 after a 6.7% plunge in Q2, Italian industrial sales falling 3.2% in September with orders up by the same amount, and pan-Eurozone consumer confidence deteriorating to a six-month low of -17.6, in line with forecast.


Provisional PMIs

Today’s agenda is monopolised by the preliminary purchasing managers’ indices. The weakest numbers are expected to come from Europe, with the services sector struggling in France, Germany and Britain. Australian publishes its trade figures tonight.

Australia set the ball rolling with manufacturing and services comfortably within the growth zone at 56.1 and 54.9 respectively. The composite reading was more than a point higher on the month at 54.7, a four-month high. Manufacturing and services in Britain are pencilled in at 50 and 42.5. The US readings are expected to be in the mid-fifties.

The only other statistic during London’s day is the Chicago Fed’s National Activity Index. Historically it is within half a percentage point of zero and is expected to be in that region today, though in recent months it has varied between -17.9 and +5.33.

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