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The widely expected fall in inflation to 3.6% announced this morning provoked some downward movement for sterling but it appears to have quickly corrected itself.
The Office for National Statistics (ONS) said that the decline was driven mainly by gas and electricity prices, but also by hotels, while food prices increased slightly in October, following a dip in September.
Sterling may also be coming under pressure as the froth comes off recent stock market gains. The FTSE lost nearly 4% this week, and while it only takes it back to where it was in late October, there are worries that it could be the start of the long-threatened sell off – and the pound does tend to follow stock markets. The Japanese yen usually goes the opposite way – strengthening as stock markets fall – but the opposite has happened this time around and it has weakened against all but the Swiss franc, which was by far the biggest loser yesterday.
Inflation was just one big data point this week and we still have Retail Sales and the Purchasing Managers Index (PMI) to go, both on Friday. It still looks like we’re heading for an interest rate cut in mid-December, but the hawkish Catherine Mann from the Bank of England has said she is yet to be convinced that inflation is beaten. Another influence will of course be the Budget, now just one week away.
In business news, America’s largest oil company ExxonMobil says it will close its ethylene plant in Fife, Scotland, with the loss of 400 jobs. It put the blame firmly on the UK government, saying “the UK’s current economic and policy environment combined with market conditions, high supply costs and plant efficiency do not create a competitive future for the site.” On the plus side for Scotland’s economy, last night its football team reached its first men’s World Cup Finals since 1998, which is likely to boost GDP next summer.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Account manager on 020 3918 7255 to get started.
GBP: Market unmoved by inflation fall
There was barely a flurry for GBP/EUR this morning, the markets having priced in not just falling inflation but also perhaps a December interest rate cut. Later today we will get house price data from the UK and on Friday it will be Retail Sales and PMI. There will also be a close eye on stock markets.
GBP/USD past year
EUR: Mixed picture for euro
Although there was barely a flicker against the pound and US dollar overall, the single currency had a surprisingly positive day against the traditional safe-haven currencies of the yen and Swiss franc. We’ve got final results for eurozone inflation in October today, although this is under much better control than in the UK at around 2.1%.
EUR/USD past year
USD: Stock market falls, plus NFP worries
It’s been a generally negative period for the US dollar, although gains on the Swiss franc and Japanese yen propped up the overall picture. Tomorrow it’s the long-awaited return of Non-Farm Payrolls (NFP) after the shutdown. It was this data which led Trump to fire the statistician recently, but will the replacement have any better numbers?
USD/GBP past year
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