Market Brief: it was a quiet start to the week in currency markets, with GBPUSD and GBPEUR trading in relatively tight ranges yesterday.

12 Sep 2017

Shaun Garrett

Dealing team

Today's data release   Key levels
09:30 UK inflation data   Support Resistance
10:20 BoE's Salmon speaks
1.3032 1.3328
11:00 US NFIB small business optimism 1.0984 1.1247
14:45 ECM's Constancio speaks    

Market overview

Hurricane Irma caused less damage in Florida than forecast and speculation that North Korea would mark the anniversary of its founding with another missile over the weekend didn’t come to pass. By one estimate, the cost of total damages from Irma dropped to $49 billion from $200 billion in the wake of the storm.
This led to investors piling back into riskier assets once more, which resulted in a rise in US Stocks, US Treasuries tumbled and the US Dollar strengthen against the safe haven Yen. The S&P 500 Index headed for an all-time closing high and the Dow Jones Industrial Average topping 22,000 whilst Bloomberg’s dollar index rose for the first time in eight days as 10-year Treasury yields climbed past 2.10 percent.
As for North Korea, one cannot get too comfortable yet as Pyongyang warned of retaliation if the UN Security Council approved harsher sanctions over its recent nuclear test. As it stood, the UN voted to increase North Korea sanctions but stopped short of an oil embargo and the proposal to freeze Kim Jong Un’s assets abroad. The US dropped some key demands in order to win support from Russia and China.
Overnight, MPs debated the Bill that will transfer EU law into UK law, with the vote taking place in the House of Commons in the early hours of the morning, as part of the Brexit process. MPs backed the government’s EU Withdrawal Bill by 326 votes against 290. Some labour MPs ignored Jeremy Corbyn's demands that they vote against. GBPUSD made small games on the passing of this Bill.

The day ahead

Turning our attention to the day ahead, this week’s raft of important UK data starts today with August’s Consumer Price inflation (CPI) figures at 09.30. Our economists forecast the rate of inflation firming from 2.6% to 2.8% (yoy), which is in line with the market consensus. Retail Price Index (RPI) is also expected to have risen a couple of notches to 3.8%. At 10.20 Bank of England’s Salmon speaks in Barcelona and the European Central Bank’s Constancio speaks at 14.45. Stateside, it is a relatively quiet, however NFIB small business optimism at 11.00 and the JOLTS Job openings at 15.00 are noteworthy releases to keep an eye on.

Thought of the day

Joseph Joubert, the French moralist who lived in the 17th century has a famous quote ‘To teach is to learn twice over’. This wisdom has found its way through to Gresham Street and the Investec offices as we constantly strive to teach ourselves about all aspects of markets, finance and business. We don’t mind admitting it takes some of at least twice to digest new learnings! This morning we have our monthly ‘Market Forum’ which presents the opportunity as a team to discuss and debate a particular topic in financial markets so that we can then take that learning back to all our customers and enrich our conversations and service. Today’s subject is ‘Unravelling the mystery of FX Volatility’ which will have a significant impact on any business with an FX exposure whether it be influencing proximity of budget rates, confidence to commit to longer term hedging or influence over the type of hedging product you choose. We believe passionately in educating our customers and would be delighted to share the transcript and details of this morning’s debate. If you would like to receive a copy please simply send a request to [email protected] and we will send you through the full details or have a call to answer any questions you have.

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