Data released by the Office for National Statistics (ONS) showed that the UK’s trade deficit narrowed in September beyond expectations. The ONS survey revealed that the value of British exports to European Union (EU) countries rose by £0.9bn, between June and September, with cars being the main contributors. A second ONS report showed that the UK’s manufacturing activity growth beat expectations in September. The British industrial production also grew in the first month of autumn, surpassing analysts’ estimates.

In the US, Senate Republicans released their tax reform plan which disappointed markets since it aims at postponing the implementation of the corporate tax cut until 2019. President Trump is visiting Vietnam as part of his trip to Asia. Trump delivered a speech in which he stressed the need for trade deals in which all parts will be equal. In Europe, the European Central Bank’s (ECB) governing council member, Ewald Nowotny, said in an interview that the Eurozone’s central bank should consider ending the QE in September 2018, if the economic conditions allow it.

Pound Sterling – UK Markets

Today, the Pound inched higher against the US Dollar with the exchange rate set at $1.31. Sterling fell against the Euro with the exchange rate set just under the €1.13 mark. ONS surveys showed that the UK’s manufacturing and industrial production grew in September while construction output slumped by 1.6%. The British trade deficit declined thanks to increased exports to EU countries.

Data published by the ONS showed that UK manufacturing production increased in September by 2.7%, on an annualised basis, surpassing City analysts’ expectations. On a monthly basis, manufacturing production increased by 0.7%, with the reading again better than anticipated. UK’s industrial production rose by 2.5%, on a yearly basis, in September. Economists were expecting a rise by 1.9%. The accompanying ONS statement said that a strong manufacturing growth was recorded in the automotive and medical equipment sectors.

The ONS survey revealed that the UK’s trade deficit declined in September, dropping to £-2.75bn. Analysts had forecast that the trade deficit would come in at £-4.6bn. The trade deficit narrowed thanks to an increase in exports to EU countries. This contribution is significant, as negotiations between the UK and the EU regarding Brexit have stalled with the prospect of a deal decreasing day by day. Between June and September, UK exports to non-EU countries were reduced by £1.7bn. The UK’s total trade deficit in the three months to September increased by £3bn, standing now at £9.5bn.

US Dollar – US Markets

The US Dollar lost a bit of ground against the Euro with the exchange rate set at €0.86. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, moved higher, coming in at 94.58. The Index recovered some ground after suffering yesterday the biggest pullback of the week.

The Senate’s Republicans released to the media their version of the tax reform bill. Their plan is different than the one that the House of Representatives revealed some days ago. The main difference is that Republican senators would like to see the corporate tax cut from 35% to 20% implemented in 2019 and not 2018. The US Dollar lost value and stocks went down as investors and traders worried about the different approach that the House and the Senate have on the tax reform bill.

US President Donald Trump spoke on the final day of the APEC CEO Summit in Vietnam and warned that his country would no longer tolerate chronic trade abuses. Trump said that the US is willing to make a bilateral trade deal with any country in the Indo-Pacific region, but expects that markets will be open to an equal degree on both sides. “We expect that private investment, not government planners, will direct investment,” noted Trump implying his opposition to Chinese business practices.

Euro – European Markets

The Euro moved higher against the US Dollar with the exchange rate set at $1.16. Ewald Nowotny, one of the ECB governing council members, gave an interview on ORF Radio with his comments attracting attention.

Nowotny said that the ECB should end its quantitative programme (QE) in September 2018, if the economic conditions in the Eurozone allow it. He mentioned that some ECB board members believe that the costs of expansive monetary policy are outweighing the benefits. Nowotny commented that an ECB rate rise won’t be a realistic prospect until 2019.

Data showed that the Italian industrial output increased by 2.4% in September, on a yearly basis, which was a disappointing reading as it missed the 4.8% estimate. On a month-to-month basis, industrial production in Italy declined by 1.3%, far more than the 0.3% anticipated figure. The French industrial production increased by 0.6% in September, on a monthly basis, in line with expectations.

Other Currencies – Highlights

Sterling gained ground against the Australian Dollar, trading at 1.71 AUD. The Reserve Bank of Australia (RBA) released its quarterly monetary policy statement. The RBA lowered its inflation forecast, noting that underlying inflation isn’t expected to reach 2.0% until 2019. It is stressed in the statement that an appreciating Aussie would put more strain on economic growth and inflation.

The Pound strengthened against the New Zealand Dollar, trading at 1.89 NZD. Retail sales using electronic cards increased by 1.2% in October when compared with the same month in 2016. On a monthly basis, electronic card retail sales rose by only 0.3%, missing expectations. Consumables and the hospitality sector helped sales pick up while fuel and apparel recorded losses.

Sterling dipped against the Swiss Franc, trading at 1.30 CHF. The SNB’s Chairman, Thomas Jordan, said that the central bank remains committed to its loose monetary policy. Jordan noted that the Swiss Franc is currently “high-valued.”