10 Oct 2017

Market Brief: Yesterday the Office for National Statistics admitted an error in data published last week.

Lewis Thorn

Dealing team

The ONS initially said that unit labour costs increased by 1.6% year on year in the second quarter of 2017 – this figure has been corrected to 2.4%. 

Today's data releases
  Key levels
09:30 UK industrial production   Support Resistance
09:30
UK manufacturing production  GBP/USD 1.3030 1.3270
09:30 UK trade balance
GBP/EUR 1.1120 1.1230
Market overview

Economists believe the corrected figure reinforces the view that the Bank of England might see issues with domestically generated inflation, thereby being marginally more supportive of the Bank of England raising interest rates from 0.25% to 0.50% next month. To date, Governor Mark Carney and the MPC have looked through the temporary bout of high inflation brought about by the weaker pound, but are now becoming more nervous that the tightness of the labour market may spark upward pressure on wages before long which could mean that the overshoot to their inflation target proves to be more persistent.

The prospects of a successful resolution on Brexit talks looks ever more like a distant dream, as Theresa May said the UK should prepare for a ‘no deal’ exit. She has been urged to walk away from negotiations by some Eurosceptic MPs if no further progress is made this month, leaving the prospect of a successful resolution even less likely. With Britain refusing to budge on the so-called divorce bill the EU demands and digging is in on guaranteeing EU citizens rights, no further progress is expected to be made anytime soon.

The day ahead

After what was a quiet day on the data front things look a little more full on the data calendar with the BRC retail sales numbers already released this morning and painted a positive picture for the sector showing sales rose 1.9% in September which is significantly higher than the 0.4% increase for the same month last year. However much of this growth has been attributed to price rises filtering through, particularly in food and clothing. At 9.30 this morning UK industrial production, manufacturing output and trade balance are due for release and with the prospects of a UK rate hike looming the data will be monitored closely.

Thought of the day

On this day in 1964, the opening ceremony of the 1964 Summer Olympics in Tokyo, Japan was broadcast live in the first Olympic telecast relayed by satellite. This innovation allowed people across the globe to witness a games that was filled with memorable moments including British Athlete Ann Packer winning the gold in the 800m, Joe Frazier winning Gold for the USA in heavyweight boxing, Bob Hayes equalling the World record in the 100m at 10.00 seconds and Ethiopian Marathon runner Abebe Bikila becoming the first person to win the Olympic marathon twice. At Investec, we pride ourselves on consistently looking to innovate. We have helped clients provide analytics on current and proposed FX hedges with the use of bespoke and innovative tools such as the Investec Roadmap and charting tools you can access through Investec Treasury Online. If you need to present your ideas to board, or if you want to fully understand how a portfolio based FX strategy might perform, as Spot changes over time, remember to speak to ask your Investec dealer for more information.

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