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Daily FX Update – 13th October 2017

In contrast to last week’s poor numbers, manufacturing output came in above the expected 0.2%, printing 0.4% led by basic metals and pharmaceuticals, while industrial output matched 0.2% expectation. However, the UK trade balance was much wider than expected and as a result, the Pound ultimately was a non mover at the start of the week, pivoting the 1.3200 handle against the Dollar and 1.1200 against the single currency.

On Wednesday, The FOMC cited that “many” saw low inflation as not transitory however “many” said a rate hike before the year was out was also warranted. Essentially the Dollar wasn’t sure which way to go and remained largely unchanged.

The main moves came yesterday and on the Pound in particular which took a sharp move lower on the back of comments from the EU’s chief negotiator Michel Barnier that Brexit negotiations were in disturbing deadlock, but then sharply reversed on news that a two year transition period may be on the cards. Ultimately, yesterday’s price activity highlights poignantly that we’re still not on a firm trajectory when it comes to Brexit and that volatility as a result is very likely. Long story short, hedge! 

Focus today turns to the US and the now all important CPI print. We also have US September advance retail sales and the University of Michigan confidence index to round off the week.

Have a great weekend. 

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