Currency markets were generally steady on Friday although Sterling had its day in the sun, shaking off its Brexit/Political woes and instead, being lifted by by strong production data. Industrial production climbed by 0.7% mm, 2.5% yy in September versus expectation of 0.3% mm, 1.9% yy, while manufacturing production rose by0.7% mom, 2.7% yy versus expectation of 0.3% mom, 2.4% yy. Trade deficit also narrowed to GBP -11.3 although construction output dropped more than expected by -1.6% mm. That might change today following a UK Sunday Times article suggesting that 40 Conservative MPs are lined up to cast a no-confidence vote in PM, Theresa May – there is little effect early on Monday, but watch this space at the London open. Otherwise it was generally rather dull on Friday, with the US observing the Veterans Day holiday, with Gold being an exception, falling $12oz after a mysteriously large trade of about 4 million ounces went through the market and awakened traders as it fell like a rock, by around 1%. Stocks moved sideways in choppy trade, while WTI settled a little lower due to concerns over increased US production. Note that US bond yields staged a strong recovery on Friday, with the 10 years jumping from a Thursday close of 2.34% to a weekend close of 2.378% after having briefly traded up to 2.4055%, which will likely underpin the dollar on Monday if the trend continues.
It is going to be a busy week ahead, with plenty of data to come from the EU, US and also from Australia and China although by the end of the week it will most likely be the progress in the US tax-plan, or lack there-of that decides the direction for markets. Monday will begin quietly but it will begin to ramp up on Tuesday with the China Retail Sales/Industrial Production/Urban Investment, the German and UK CPI, the EU Preliminary Q3 GDP and the German/EU ZEW Economic Sentiment Survey. Wednesday will see the UK Unemployment numbers for September and the US CPI and Retail Sales for October, while Thursday will focus on the Australian Unemployment, EU CPI, UK Retail Sales and various bits of secondary US data. Finally, Friday will have the EU Current Account, US Building Permits and Housing Starts and the Kansas Fed Mfg Activity to deal with. As we said, there will be plenty of Trump related headlines linked to the ongoing US tax-plan saga which will probably be the main driver of events in the coming week. Last week, saw how a setback in the US tax-reform could dent the dollar and in the coming week we need to see progress if it is is to resume its rise. We shall see. Also of note this week, Draghi, Yellen, Carney, Kuroda et al will be speaking at an ECB round table conference on Tuesday, while the Fed’s Harker (Monday – Asian time zone), Evans, Bostic, Mester, Kaplan, Brainard and Williams are lined up to speak at various points over the week.. Have a good week.
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