Market Brief: Last week ended on a positive note for the Pound whilst the US dollar found itself on the back foot.

11 Sep 2017

Shaun Garrett

Dealing team

Today's data release   Key levels
08:00 ECB’s Coeure speaks
  Support Resistance
1.3008 1.3325
16:00 New York Fed survey of consumer expectations
1.0888 1.1247
 

Market overview

GBPUSD put a run on the magical 1.3200 mark, as the market focussed more on the uptick in UK manufacturing output, rather than the mixed bag presented by the construction and industrial numbers. Manufacturing output posted a 0.5% gain on the month in July beating the 0.3% expected.
Across the pond, US Treasury yields fell dragging the dollar down with it due to a combination of things - the Korean crisis being a cause for concern, Florida bracing itself for a battering from Hurricane Irma, furthermore expectations that personnel changes at the Fed made the monetary policy agenda even more cautious. As it turned out, speculation that North Korea would do something silly on its 'Foundation Day' holidays over the weekend, never materialised and whilst the North Koreans enjoyed barbeques and street parties instead, Irma did wreak havoc on Florida, despite being downgraded to a Category 4 and then a Category 2 hurricane.
As we look at the week ahead, today the House of Commons is set to vote on the ‘Great Repeal Bill’ (EU Withdrawal Bill) today. Domestically there are a number of key data releases - on Tuesday we have August CPI inflation figures due. Our economists forecast the rate of inflation firming from 2.6% to 2.8% (yoy). On Wednesday, UK Labour market data will also provide the latest update on wage growth, shaping views on the current squeeze on real household incomes.
On Thursday morning The RICS housing survey will be due, however the week’s main event will follow that afternoon in the form of the BoE’s latest policy decision, which should see policy kept on hold with Bank rate held at 0.25%. We suspect that Ian McCafferty and Michael Saunders would have maintained their votes for a 25bp hike in rates, but that the overall vote will be 7-2 in favour of no change. Also worth noting is that the Swiss National Bank are set to announce its latest policy decision on Thursday too. Like the BoE the SNB aren’t likely to spring any surprises as the Bank of Canada did on Wednesday last week, when they raised interest rates 25bp to 1.00%. Similarly there are no expectations for any change in policy at the SNB.
Stateside, August inflation data will be one of the key figures this week. Aside from the CPI inflation data, retail sales, the Empire State manufacturing survey and Michigan consumer sentiment will all be worth keeping an eye on too.

Thought of the day

This weekend produced an action-packed, sports filled 2 days in which we saw Rafa Nadal clinch his 16th Grand Slam (his 2nd this year), Chris Froome becoming the first British winner of the Vuelta a Espana, Mo Farah winning the Great North Run for the fourth consectutive time and Sloane Stephens wining her first Grand Slam - not bad for someone who was ranked 957 six weeks ago! More importantly we have a number of happy Arsenal fans in the office with their ‘Wenger In’ signs held firmly above their heads after Arsenal beat Bournemouth 3-0. We follow the busy weekend, with an action-packed week on the FX markets, particularly for the Pound. Starting with the vote on the Great Repeal Bill today, Inflation data tomorrow, and the Bank of England meeting on Thursday. Will Sterling continue its recent push or will the rally come to a grinding halt? Please contact your Investec Dealing team to discuss further on 0800 055 6339.

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