Newsletter – 2nd November 2018

Morning Bulletin

Yesterday

  • The Bank of England kept rates unchanged at 0.75% as expected yesterday however indicated that a smooth exit from the European Union could cause the pace at which rates increase to quicken. The vote by the MPC was 9-0 in favour unchanged rates.
  • BoE Governor Mark Carney said that a smooth Brexit could cause business investment to ‘rebound’ with businesses currently behaving cautiously due to uncertainty.
  • Sterling rallied yesterday due to a combination of the Bank of England’s hawkish comments and drip feeding of rumours surrounding Brexit negotiations.
    • The Bank of England said that it could raise interest rates in 2019 even in the case of ‘no-deal’ Brexit which effectively provides an insurance policy for sterling investors against a major decline in the pound.
    • The Financial Times reported that the EU is ready to offer the UK a ‘bare-bones’ UK-wide customs union with the EU in the event of the Irish backstop being triggered.
    • PoundSterlingLive reported if negotiations over the future trading relationship fail to deliver a frictionless Irish border during the two-year transition period then the backstop would come into play: it would operate until a permanent trade agreement between the U.K. and E.U. is agreed, thereby guaranteeing no hard border between the Republic and Northern Ireland.
    • The apparent concession by the EU caused sterling to regain October’s losses.
  • GBP/EUR opened at 1.1282, rallied to a high of 1.1411 and closed at 1.1393 representing a 0.98% increase on Thursday and a 1.72% increase during the last 48 hours.
  • GBP/USD opened at 1.2765, traded a high of 1.3034 and closed at 1.2997 representing a 1.81% increase on Thursday.
  • UK manufacturing PMI came in at 51.1 vs 53.0 expected.
  • From the US ISM manufacturing PMI came in weaker than expected at 57.7 vs 59.0.
Overnight
  • Australian retail sales m/m came in weaker than expected at 0.2% vs 0.3%.
  • GBP/AUD, GBP/NZD and GBP/JPY are trading at 1.7974, 1.9505 and 147.02, respectively.
Today
  • UK construction PMI came in better than expected this morning at 53.2 vs 52.0 expected.
  • At 1.30pm we can look forward to employment data from Canada and the US.
Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1382 -0.08
GBP/USD 1.3033 +0.27
EUR/USD 1.1446 +0.33
AUD/USD 0.7249 +0.61
Time (GMT) Region Data Release Forecast Previous
13:30 CAD Employment change 12.7K 63.3K
13:30 CAD Unemployment rate 5.9% 5.9%
13:30 CAD Trade balance 0.2B 0.5b
13:30 USD Average hourly earnings m/m 0.2% 0.3%
13:30 USD Non-farm employment change 194K 134K
13:30 USD Unemployment change 3.7% 3.7%