Mixed Day For Sterling

16 November, 2017

Simon Eastman

Wednesday was a mixed day for sterling as we saw a raft of releases from around the globe affect the pounds trading direction.

To start the day, we had UK unemployment, average earnings and claimant count to digest. The claimant count and unemployment rate both came out as expected, with no change from last month, as did the average earnings figure. The only release to beat expectations was average earnings including bonuses, which slightly isn’t a true insight into how the general economy is fairing. As a result, markets took the “as expected” figures lightly and the pound dropped in value against the euro. The drop was just over half a cent, meaning that holiday home in Spain costing €250,000 cost an extra £1200 within a matter of minutes.

EU Trade Balance Boosts Euro

Following the UK data, we saw the release of EU trade balance, giving an insight into the Unions import and export spend Markets were expecting a slight drop in the figures from €21.6 billion down to €21.2 billion, but in fact were surprised with an increase of nearly €4 billion. This gave the single currency the boost needed to hold its gains against the pound and claw further ground against the US dollar, taking nearly half a cent as its rally continues.

US Inflation Held Steady

After lunch it was the turn of the US to release some figures. Starting with retail sales which gained slightly over expected zero growth and inflation which stayed steady at 2 percent target, down from the previous months reading of 2.2 percent. The better than expected figure wold normally improve the currency, but in this case, a slowing inflation rate and improving retail sales would indicate the Fed may hold fire on another interest rate hike next month. The result was less dollar negative than we might’ve expected though, as cable traded sideways and the dollar/euro rates fell back as the dollar clawed back some ground.

The Day Ahead

Today we have UK retail sales, EU inflation, US jobless claims and a few Bank of England member speeches this afternoon, including Mark Carney. With the current focus on the Banks recent rate hike and pressure on the pound from Theresa May’s failing Brexit negotiations, any comments from the BoE members may throw up some volatility, not to forget the key data releases from the UK and EU this morning. Anyone looking to make a currency transfer in the coming days, may be prudent to speak to one of the team sooner rather than later about locking in your rate.