|Today's data releases||Key levels|
|10:00||EU industrial production, ZEW, GDP||GBP/USD||1.3030||1.3230|
|10:00||EU Draghi, Yellen, Carney, Kuroda Speak in Frankfurt||GBP/EUR||1.1070||1.1375|
Sterling struggled yesterday as further political uncertainty plagued the market, hitting a low of 1.3062 against the USD and 1.1207 against the Euro. David Davis extended an olive branch to Conservative Party rebels suggesting that the Government would allow parliament the opportunity to debate and scrutinise any final Brexit agreement. May’s blueprint for Britain’s exit from the EU faces a crucial test starting today, when members of parliament will debate the EU withdrawal bill that she says is vital to give companies confidence that the rules will not change after Brexit. Reports from Bloomberg have suggested that David Davis said it is 50-50 whether the UK gets a breakthrough in divorce talks by December. Talks are deadlocked over the contentious divorce bill as the divided U.K. government has been reluctant to accept the EU’s demands to make a better offer. The EU has given the UK two weeks to make more financial concessions, and says it won’t let talks move on to the future trading relationship - or even the transition deal that companies on both sides crave - until it does so. EU leaders meet December 14 for a summit and in the run-up to that meeting will decide whether the U.K. has done enough on the divorce issues to move talks along. If December is a bust, EU officials have indicated the next opportunity for a breakthrough will be in March.
German GDP figures were released at 7am this morning, and showed that German economy grew by 0.8% on the quarter in Q3, faster than expectations of +0.6% and above Q2’s pace (also +0.6%). The statistics office mentioned that net trade and investment were two big drivers. This opens up a possibility that Eurozone growth numbers will be revised up from their initial estimate of +0.6%, when new figures are released later this morning. This has supported the Euro, pushing closer to 1.1700 against the US Dollar, the highest point since 26th October. CPI Inflation figures also released from Germany were unrevised, in-line with expectations.
Chinese data for October released overnight produced softer data than market expectations. Industrial output figures disappointed slightly against consensus, coming in 0.1% lower than consensus at 6.2% and down from 6.6% in September. Retail sales figures were also softer than expected at 10.0% y/y, whilst consensus had been 10.5% y/y. The October reading was also down on September’s 10.3% y/y. The data provided further pointers to the softer H2 growth pace continuing as we head to the end of the year. We continue to see the GDP growth for 2017 overall to be more or less unchanged on 2016; our forecast is for 6.8% this year from 6.7% last year. The Aussie Dollar managed to mostly shrug off the downbeat Chinese economic data after the latest survey of businesses from NAB showed the best conditions in two decades, with sales and profits surging in October. The Aussie is sensitive to Chinese data as it is often used as a proxy for that country because of Australia’s major trade exposure.
The day ahead
As mentioned above, MPs meet today to scrutinise the EU Withdrawal bill. Alongside this the UK releases Inflation data at 9:30am, where it is expected that Mark Carney will have to pen a letter to the Chancellor to explain why the UK’s inflation reading is at 3.1%. EU GDP, ZEW and Industrial Production data is released at 10am. At the same time we are expecting to hear from Draghi, Yellen, Carney and Kuroda at a conference in Frankfurt. Investors will be keeping a watchful eye on Mark Carney as he speaks for the first time since raising UK interest rates. Finally, we cap the busy day off with PPI data from the States at 13:30.
Thought of the day
Ten years ago on the cover of Forbes magazine, was picture of a man holding a Nokia phone to his ear with the caption “Nokia - one billion customers - can anyone catch the cell phone king?” How quickly things can change as here we are ten years on scratching our heads thinking what a silly question that was! In the same way that Apple, a computer company, revolutionised the mobile phone industry over the last decade, sweeping the rug from under Nokia’s feet, we at Investec are looking to revolutionise the way you manage your Foreign Exchange risk. Many of you will be familiar with our Treasury online portal, some of you will have been impressed with our Treasury Roadmap tool, but now we are starting the development of our latest and greatest tool “Hedging Analytics”. Unlike Nokia did in the early Noughties, we never rest on our laurels - the Investec way is to consistently look to innovate and challenge convention (part of our entrepreneurial spirit). Please speak to your Investec dealer today to find out more about the exciting new tool which we are currently developing. Imagine planning your FX hedging on a something akin to an iPhone, while your competitors plan their strategy on an old 2007 Nokia!? With our new tool, you’ll have that kind of an advantage! Watch this space…