020 7898 0500Post the US presidential election, this week was much calmer for sterling. UK economic data has been mixed but the last critical figure on Thursday, the retail sales number, was positive.
UK retail sales jumped in October to 1.9% [expectation 0.5%, previous month 0.1%], bolstered by colder weather and Halloween sales at supermarkets. Sterling received a boost. The increase suggests that, despite all the political uncertainty, confidence is robust. The retail sales litmus test will happen next year, when Black Friday and the Christmas season are over.
Sterling lost ground early in the week as The Times reported on a leaked memo which suggested that the government has no overall plan for Brexit. It warned that Whitehall is working on 500 Brexit-related projects and could need 30,000 extra staff. More importantly, it seems that there are divisions within the cabinet over the direction of Brexit negotiations. Given the tone of Prime Minister’s Questions in the House of Commons yesterday, the division seems clear.
This week also saw the release of unemployment and inflation data, as well as a hearing with Bank of England (BoE) Governor Mark Carney. Inflation was lower than the previous reading and below forecast. Governor Mark Carney reiterated that he will definitely quit his role as Governor of the BoE in 2019 after promising to stay for an additional year last month. “I added the year out of a sense of responsibility,” Carney told lawmakers in London. He went on to say that the BoE expects inflation to hold above 2% by mid-2017.
The unemployment data painted a mixed picture. The claimant count increased by 9,800, the biggest rise since May, but unemployment fell by 37,000 to 1.6 million (4.8%) in the three months to September, hitting an 11-year low.
Looking the final trading session of the week, BoE Deputy Governor Ben Broadbent is due to speak at the Annual Conference of the Society of Business Economists.
