UK Retail Sales Rise in October
The Pound strengthened against the US Dollar and the Euro as UK retail sales made a stronger than expected rebound in October. Purchases of second hand-goods were one of the main drivers, but data showed that clothing sales declined by 1.5% because of the warmer weather. The report published by the Office for National Statistics (ONS) revealed that retail sales dipped by 0.3%, on an annualised basis, for the first time since 2013. Economists suggest that British consumers remain reluctant to spend any money as a result of Brexit uncertainty and sluggish wage growth.
Eurozone inflation in October came in at 1.4%, according to expectations, but the Euro didn’t get a boost since market experts didn’t see their hopes for a higher reading materialise. In the US, Republican leaders said to White House reporters that they have the necessary numbers in the House of Representatives to pass the tax bill. According to media reports, Mohammed El-Erian is one of the candidates for the chair of the vice-president in the Federal Reserve.
Pound Sterling – UK Markets
Today, the Pound edged up against the US Dollar with the exchange rate set at $1.31. Sterling edged up against the Euro with the exchange rate set at €1.12. Retail sales in October was the major economic data release for today.
According to ONS data, retail sales in UK rose by 0.3%, on a month-to-month basis, in October. Economists had anticipated a marginal 0.1% increase, after retail sales declined by 0.7% in September. On an annualised basis, retail sales fell by 0.3%, less than the 0.6% drop expected by analysts. This is the first annual decline in the last five years. The ONS report noted that sales growth came mainly from the second-hand goods sector, including items bought from antique dealers and in auction houses.
Mark Carney will attend the BoE’s Future Forum in Liverpool. The Governor said in an interview on ITV that the BoE will do whatever it can to support the economy, in case there is no Brexit deal with the European Union (EU). Carney reiterated that the BoE’s policymakers aim at keeping inflation low and the financial system away from any dangers. Carney reassured people that they don’t have to worry about the UK’s financial stability. The Canadian banker, however, stressed that a transitional deal would be beneficial for all sides.
US Dollar – US Markets
The US Dollar inched higher against the Euro with the exchange rate set at €0.85. The US Dollar Index (DXY) lost a bit of ground coming in at 93.84. The US currency’s value was increased after upbeat economic data made investors more optimistic about future rate hikes by the Fed.
James Gorman, the CEO of Morgan Stanley, told CNBC that the US economy needs to get back to normal. Gorman said that the rate hike by the Fed in December is “a done deal,” and added that he hopes for three more hikes during the next year. Morgan Stanley’s chairman noted that the Republican plan for a 20% corporate tax “would be a very positive thing and would stimulate the economy.” Regarding rumours that have the White House considering Mohammed El-Erian for the Fed’s Vice Chairman, Gorman said that Pimco’s CEO is a credible candidate.
Marc Cuban, a billionaire businessman and potential presidential candidate who had been a supporter of Donald Trump, said in a Reuters Newsmaker forum that he doesn’t believe that lower corporate taxes will have an impact on investment decisions. On the contrary, he stressed that an employment tax cut would spur growth. Another participant in the forum was Alan Binder, a former Fed vice-chairman, who noted that past data have failed to show a link between cutting tax rates and subsequent growth.
Euro – European Markets
The Euro dipped against the US Dollar with the exchange rate set at $1.17, retreating from the one-month high that it hit yesterday. Eurozone inflation data dominated the news coming from the continent.
A report published by Eurostat revealed that Eurozone inflation stood, on an annualised basis, at 1.4% in October. The result was in line with economists’ expectations. On a monthly basis, inflation rose by 0.1% as it was anticipated. Core inflation, which means that food, energy, alcohol and tobacco prices are excluded, came in at 0.9% on an annualised basis. The single market currency kept losing value since markets were hoping for a surprising inflation move upwards.
Yves Mersch, who is an executive European Central Bank (ECB) board member, told CNBC that the Euro-bloc’s central bank could raise its growth forecast in December. He tried to reassure markets that the forecast inflation drop won’t be as steep as it was believed at first. Mersch noted that the ECB’s toolbox is not limited on asset purchases, adding that the world markets should not expect an increase of those purchases as the ECB wants to minimise distortions.
Other Currencies – Highlights
Sterling gained ground against the Australian Dollar, trading at 1.73 AUD. According to an Australian Bureau of Statistics (ABS) survey, the country’s unemployment rate fell to 5.4% in October, surprising analysts who believed that it would remain stable at 5.5%. The participation rate declined to 65.1%, a tad less than expected. Almost 3,700 Australians found a job, with October being the 13th consecutive month when employment rose.
The Pound strengthened against the New Zealand Dollar, trading at 1.92 NZD. Ross Van Der Schyff, the general manager of Business Integrity Services in the Ministry of Business, Innovation and Employment (MBIE), commented on the excellent result that New Zealand achieved by being on the top of the World Bank’s “ease of doing business” rankings. Van Der Schyff said that people who want to start a legitimate business in the country can benefit from the little time and cost required to do it.
Sterling lost value against the South African Rand, trading at 18.89 ZAR. A Reuters poll suggested that the South African Reserve Bank (SARB) will keep interest rates unchanged in its monetary policy meeting next week.