Sterling slips, despite U.K. CPI (inflation) rising, as the Brexit bluster appears to have run out of road, DJIA reaches record 23,000, as U.S. dollar rises versus its main peers

Oct 18 • Morning Roll Call • 1250 Views • Comments Off on Sterling slips, despite U.K. CPI (inflation) rising, as the Brexit bluster appears to have run out of road, DJIA reaches record 23,000, as U.S. dollar rises versus its main peers

Sterling fell on Tuesday, shortly after the U.K.’s latest CPI figure (and other inflation data) was released, coming in as the economists’ polled forecast; at 3% YoY. The fall in sterling versus its main peers, was due to the BoE governor Mark Carney, when giving evidence in front of U.K. lawmakers, declaring that he was making plans for what’s being termed a “hard Brexit”. The Tory party’s Brexit negotiators now face another critical deadline, as MEPs will make another decision regarding the divorce on Thursday.

The U.S. dollar continued the momentum developed yesterday built on the possibility of John Taylor, a hawkish option, being tipped to take over from Janet Yellen as chair of the Fed in February. The next rise in the USA’s key interest rate appears to be odds on for December, whilst if a more hawkish Fed chair is appointed, then the three rate rises suggested for 2018, in order to normalise the interest rate landscape, looks far more likely. The DJIA reached a record intraday handle of 23,000 on Tuesday, based on: earnings for certain key listed companies beating forecasts, home builders’ confidence rising and U.S. factory production finally rising last month, for the first time since June, whilst import and export prices also rose. The safe haven appeal of gold was reduced, as the precious metal fell by circa 0.8% on the day to $1285 per ounce, at one stage in proceedings breaching S2 at $1281. WTI oil finally rose by approx. 0.3% on the day to $52.13, after experiencing a session of whipsawing, falling to a session low and to S2, at $51.44.

The euro experienced a mixed day versus its peers, CPI came in as forecast at 1.5% YoY, whilst the various ZEW surveys for Germany and the Eurozone missed forecasts. Added to this Spain’s GDP growth reduced, whilst the Catalonia issue took another twist, as the Madrid central government rejected the claim for independence. The main European equities slipped during the day, however, Spain’s IBEX rose, as the potential rejection of Catalonia’s split sent out a positive message of governance.

U.S.DOLLAR

USD/CAD rose and fell during the day, in correlation with the rise and fall of WTI oil and commodities’ values and in relation to the Canadian dollar as a commodity currency. Rising through R1 at one stage up circa 0.4%, USD/CAD fell back to close on flat on the day, resting just above the daily pivot point at 1.2522. The dollar rose versus the Swiss franc, who’s safe haven appeal reduced during Tuesday’s trading sessions, at one stage USD/CHF threatened to breach R3, ending the day up circa 0.5% at 0.9783. USD/JPY ended the day up circa 0.2%, at 112.20.

STERLING

GBP/USD fell through S2 at one stage in the European morning session, losing circa 0.8%, to then recover to end the day down approx. 0.5%, at 1.3189. Both GBP/AUD and GBP/JPY fell to S2, to end the day down circa 0.5%. GBP/CHF and GBP/NZD fell to S1. The value of Sterling will be under close scrutiny over the coming days and weeks, as the U.S. dollar is recovering and Brexit issues are finally becoming critical.

EURO

EUR/USD fell through S3 and by close on 1% in the European morning trading session, to then recover to end the day down circa 0.5% at 1.1768. EUR/GBP initially fell in early trading, and the momentum continued after the U.K. CPI data was published, however, as Mark Carney gave evidence to parliamentarians the pound fell versus the euro, EUR/GPB rose to end the day just below R1, at 0.8922, up approx. 0.2%, the euro ended the day with similar gains versus the Swiss franc. Versus both Australasian dollars the euro was effectively flat on the day.

EQUITIES AND COMMODITIES SNAPSHOT FOR OCTOBER 17th.

• DJIA closed up 0.18%.
• SPX closed up 0.07%.
• FTSE 100 closed down 0.14%.
• DAX closed down 0.07%.
• CAC closed down 0.03%.
• WTI oil closed the day out up circa 0.3%.
• Gold ended the day down approx.

KEY ECONOMIC CALENDAR EVENTS FOR OCTOBER 18th.

• EUR ECB President Draghi speaks in Frankfurt.

• GBP ILO Unemployment Rate (3M) (AUG).

• USD MBA Mortgage Applications (OCT 13).

• USD Housing Starts (MoM) (SEP).

• USD Building Permits (MoM) (SEP).

• USD U.S. Federal Reserve Releases Beige Book.

• JPY Merchandise Trade Balance Total (Yen) (SEP).

 

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