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Weak Retail Sales Slow Sterling Rally

Weak Retail Sales Slow Sterling Rally

February 16th, 2018

The Pound rallied against the US Dollar earlier today, due to improved optimism about Brexit transition period negotiations. Sterling lost some strength after the Office for National Statistics (ONS) report showed January retail sales figures came in much weaker than had been expected. For the three months to January, sales increased by just 0.1%, which the ONS said could be “partly attributed to a background of rising prices.” The US Dollar is weakened partly due to investors’ concerns that the US economy may be overheating, or completing a cyclical upturn with a slowdown due to begin ahead. Inflation is accelerating, as was seen in yesterday’s Producer Price Indices, while industrial production is down. Another factor that is weighing on the Dollar is the long-term impact of the deficit that will be created by borrowing to cut taxes for companies in the US budget.

  • US Inflation in Spotlight
    February 14th, 2018

    US Inflation in Spotlight

    The Pound picked up strength yesterday, following the news that UK inflation has not yet eased, according to the Consumer Price Index. Inflation is broadly expected to recede back to 2% this year, and it is likely that the Bank of England is waiting for wage growth to rise above 2.5% before raising interest rates. Today, the International Monetary Fund (IMF) has recommended that the UK prioritise improving its productivity performance. The Pound has slipped to a five-week low to the Euro ahead of a speech on Brexit by foreign minister Boris Johnson. The US Dollar weakened ahead of today’s inflation data due out when the Consumer Price Index (CPI) is released. While inflation is expected to have eased, today’s CPI will be critical since previous hints of rising inflation sparked a global stock market rout. If inflation is unexpectedly stronger, the US Dollar will be likely to benefit by strengthening in expectation of more interest rate hikes by the Federal Reserve.

  • UK Inflation Holds Steady
    February 13th, 2018

    UK Inflation Holds Steady

    The Pound is stronger after today’s report by the Office for National Statistics (ONS) shows that UK inflation has not eased lower, as had been anticipated. The Consumer Price Index had been expected to show that inflation had eased down from 3% in December to 2.9% in January, however, prices remain higher than they were a year ago. The data makes it more likely that the Bank of England will raise interest rates as early as May, which boosted the Pound. The US Dollar is weaker on concerns regarding the widening US deficit after president Donald Trump unveiled his infrastructure blueprint which will rely on local governments to fund $1.3trillion in improvements to roads and bridges. Critics of the plan, which had been an election promise, call it a “scam” because it will increase local taxes and fees for Americans. Also, the 2019 budget plan calls for sharp cuts to welfare spending, hiking military spending and increasing the deficit to record high levels.

  • Sterling Steady as Consumer Spending Drops
    February 12th, 2018

    Sterling Steady as Consumer Spending Drops

    The Pound is stable, although weaker, after losing value on Friday following concerns that a Brexit transition is not “a given.” EU chief negotiator Michel Barnier made it clear that the EU would not negotiate on some of the issues Britain has raised on the proposed transition agreement. This morning, Visa’s survey shows that UK household spending fell in January for the first time in five years. Visa cards account for a third of payments in Britain and the decline in spending was the eighth decline in the past nine months. The Bank of England’s interest rate intentions may be clarified by Monetary Policy Committee members Gertjan Vlieghe and Ian McCafferty who will speak today. The Euro is edging a little higher against the weakening US Dollar, today, as markets return to calm. Last week, the US Dollar had it strongest weekly performance since 2016, due to nervous investors seeking less risky currencies which also included the Japanese Yen and Swiss Franc. Volatility may return to the markets if inflation is seen to be rising, according to the US Consumer Price Index which is due out on Wednesday.

  • Barnier’s Transition “Not a Given” Comments Worrisome
    February 09th, 2018

    Barnier’s Transition “Not a Given” Comments Worrisome

    Brexit transition deal not a given, and EU’s stance on Irish border is made clearer by Michel Barnier.

  • BoE’s Upbeat Outlook Boosts Sterling
    February 09th, 2018

    BoE’s Upbeat Outlook Boosts Sterling

    The Pound surged against the Euro and the US Dollar yesterday, after the Bank of England (BoE) indicated interest rates might be raised sooner than investors expect. The BoE also raised its GDP forecasts for this year, but governor Mark Carney said the estimates were based on a "smooth transition" Brexit agreement process. Today's release showing the UK's trade deficit widened by more than expected has sent Sterling lower, on growing concerns about the UK's future trade prospects.

  • Brexit: Planning Pandemonium with a Dash of Delay
    February 08th, 2018

    Brexit: Planning Pandemonium with a Dash of Delay

    Cabinet ministers are accusing the government of undermining its own Brexit negotiations, the EU sees a longer Brexit transition period than 2020 and pro-EU George Soros, donates £400,000 to pro-EU campaign.

  • Spotlight on BoE’s Super-Thursday
    February 08th, 2018

    Spotlight on BoE’s Super-Thursday

    The Pound is holding steady ahead of today's key monetary assessment and policy decisions by the Bank of England (BoE). The BoE is not expected to raise interest rates, but governor Mark Carney's comments on inflation and UK growth will be pivotal for Sterling's strength or weakness. Also, a vote by over two members of the monetary policy committee to increase interest rates will send a signal that the central bank is likely to increase rates by the middle of this year.

  • Brexit Planning Too Slow, Say MPs
    February 07th, 2018

    Brexit Planning Too Slow, Say MPs

    MPs have warned the government that preparations for Brexit have been “too slow” and must “face up to some hard choices.”

  • Sterling Looks to BoE for Recovery
    February 07th, 2018

    Sterling Looks to BoE for Recovery

    The weakened Pound is likely to rebound on expectation that the Bank of England (BoE) will indicate their intention to raise interest rates in May. Tomorrow, the BoE's monetary policy committee decision and inflation report will be closely watched for signals that would lift Sterling. A leading economic forecaster has upgraded their expectations for Britain's economic growth, saying that the BoE will raise rates in May and November. Today, prime minister Theresa May and her senior ministers begin two days of critical meetings, to decide the UK's future relationship with EU. The cabinet will also focus on trade, Northern Ireland and immigration.

  • Pro-EU Tory MP to PM: “sling out” Brexiteers
    February 06th, 2018

    Pro-EU Tory MP to PM: “sling out” Brexiteers

    Pro-EU Conservative Party MP, Anna Soubry has urged prime minister Theresa May to “sling out” staunch pro-Brexit MPs, or else she will quit the party to form a new political alliance.

  • Sterling Slips on Brexit and Economic Fears
    February 06th, 2018

    Sterling Slips on Brexit and Economic Fears

    The Pound is under pressure after the UK ruled out staying in the customs union with the EU, since the government has yet to agree on a post-Brexit trade deal stance. The inner cabinet meets this week to formulate their goal for a future partnership. The EU's chief negotiator, Michel Barnier has warned that trade barriers are "unavoidable" if the UK leaves the customs union. Yesterday's report that GDP growth will likely slow to 0.3% in the first quarter of the year has also weakened Sterling. The Pound is being further impacted by the global stock market rout which has rattled investors' confidence.

  • Brexit: Britain to Leave Customs Union
    February 05th, 2018

    Brexit: Britain to Leave Customs Union

    Following a turbulent week within the Conservative Party, prime minister Theresa May has announced that Britain would be leaving the customs union after Brexit.

  • Sterling Slips after Service Growth Slows
    February 05th, 2018

    Sterling Slips after Service Growth Slows

    The Pound has weakened on the news that the UK's Services sector, which accounts for about 80% of the UK economy, has slowed to the lowest level of growth since September 2016. The IHS Markit Services Purchasing Managers Index (PMI) unexpectedly fell from December's figure of 54.2, dropping to 53.0. Companies reported a decrease in new work, due to "the loss of existing clients and lingering concerns surrounding the UK's exit from the EU." Markit's chief business economist noted that the combined PMI data indicates the UK's GDP growth rate this year is down to "just under 0.3%."

  • Will Brexit Split the Tory Party?
    February 02nd, 2018

    Will Brexit Split the Tory Party?

    Conservative MPs who backed Remain during the EU referendum will try to force the government to deliver a soft Brexit, as Liam Fox quashes any possibility of staying in the customs union with the EU.

  • UK Construction Stalls on Brexit Concerns
    February 02nd, 2018

    UK Construction Stalls on Brexit Concerns

    Sterling slipped against the US Dollar and the Euro following the news that the UK's construction sector has slowed down sharply in January. Today's IHS Markit Construction PMI reveals growth in the troubled building sector has contracted to levels near stagnation.

  • No.10 to EU Migrants: “You Shall Not Pass”
    February 01st, 2018

    No.10 to EU Migrants: “You Shall Not Pass”

    UK Prime minister Theresa May has said that freedom of movement of EU citizens will end on Brexit day, 29 March 2019.

  • Sterling Rallies Although UK Manufacturing Slows
    February 01st, 2018

    Sterling Rallies Although UK Manufacturing Slows

    The Pound has been stronger to the US Dollar, in spite of today's disappointing manufacturing release, showing UK factory output for January fell to a seven-month low. The IHS Markit Manufacturing Purchasing Managers Index (PMI) had been confidently expected to rise to 56.5, but it dropped to a reading of 55.3 as output and new orders decreased. There was a rise in export orders, however, slowing growth and rising prices contributed to the UK failing to keep pace with Europe's manufacturing surge.

  • “Not a Quitter” - Defiant May not Backing Down
    January 31st, 2018

    “Not a Quitter” - Defiant May not Backing Down

    This week, in the face of her critics, UK prime minister Theresa May said that she is “not a quitter,” but admitted she needs to communicate better.

  • BoE Boosts Sterling to Dollar Rate
    January 31st, 2018

    BoE Boosts Sterling to Dollar Rate

    The Pound recovered against the US Dollar following the Bank of England (BoE) governor Mark Carney's address to the House of Lords, yesterday. Carney indicated that the BoE is prepared to raise interest rates, in order to "focus on returning inflation sustainably to target over an appropriate horizon." Carney also noted that a "disorderly Brexit looks less likely than before," which effectively calmed markets after a negative Brexit impact government report was leaked. Sterling has since slipped after EU officials said the City won't have free trade on financial services after Brexit.

  • EU Exit Analysis - Brexit to Damage UK Growth
    January 30th, 2018

    EU Exit Analysis - Brexit to Damage UK Growth

    A leaked government report has emerged and states the UK economy will grow at a slower rate outside of the EU, regardless of what deal is agreed on in Brussels.

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