Remember, remember the fifth of November

Gunpowder, treason and plot

Then on the Seventh of November the BBC makes salacious attempts to undermine our monarch, amongst others, in suggesting the leaked “Paradise Papers” intimated some kind of nefarious activity in relation to offshore trusts and taxation. It is crucial that we point out that there is “no evidence” of any wrongdoing. In relation to the BBC…

I see no reason why gunpowder treason

Should ever be forgot….

….except that actually Guy Fawkes was an old boy from my school in York and by and large, at least locally, he is believed to have been framed. Now I can hear you scoff at the very idea but even that is no more explicable than the Bank of England voting 7-2 to increase its interest rate from 0.25% to 0.5%, to then have GBP value take an unexpected nose dive. The minority two members of the Court of Directors, who voted to keep rates on hold, believe that wage growth in the UK was/is too weak to justify a rate hike. Whilst that view was reflected by many economists, especially after the event, it was not the result predicted by market commentators. Overall, the hike was too dovish to keep the pound at the recent highs.

Guy Fawkes, Guy Fawkes, 'twas his intent

To blow up the King and the Parliament

UK production figures are due on Friday this week. If the data beats expectations this should provide some support for GBP. Overall, there is a lack of key data out of the US and Eurozone so this may provide little direction for USD and EUR.

GBP/USD

In the US, the Fed voted unanimously to keep their interest rate on hold at 1.25%, in line with expectations but with the door left wide open for a third rate hike in December, there is very strong support for this to be expected.

The US created 261,000 new jobs in October and whilst a strong rebound was anticipated following the two hurricanes that kept Americans away from work, the data was slightly below expectations. Non-farm payrolls for September were revised up from -33,000 to 18,000, suggesting the hurricane impact was not as damaging as once thought. The unemployment rate ticked lower to 4.1% however, earnings were also lower at 2.4%.

GBPUSD opened this week around the 1.31 mark and appears to be slowly climbing as the US opens.

GBP/USD movement can be seen on the graph below:

GBPUSD 06-11-2017.png

GBP/EUR

Three score barrels of powder below

Poor old England to overthrow

BoE Governor Mark Carney said the UK 'would be booming' if it wasn't for Brexit and continued with the bank's predictions for foreign investment in Britain was now 20% lower than they estimated in the month before the referendum. Poor old Britain indeed. He added that in the event of a bad Brexit deal, the bank would not be able to cut future interest rates because of that inflationary pressure. In the Eurozone the growth rate for Q3 came as a surprise and GDP rose to 0.6%, just below the revised 0.7% from the previous quarter but exceeding expectations. This pushed the annual rate to 2.5%, from 2.3% in comparison to Q3 last year. The unemployment rate fell below 9% for the first time since 2009, also beating forecasts. The positives were offset by disappointing inflation with CPI falling to 1.4%.

GBP/EUR movement can be seen on the graph below:

GBPEUR 06-11-2017.png

EUR/USD

Positive euro-zone growth continues and has reached 2.5% y/y in Q3 this year and unemployment rates also look good, dipping under 9%. The level of inflation is dropping once again: 1.4% in the headline and 0.9% in core CPI. Importantly the ongoing Catalan crisis has reached new lows with the jailing of most of the ousted regional government, but the markets and EUR value appear to ignore it. In the US, the Fed is set to raise rates in December, the last expected hike before Powell is due to enter his new job as Fed Chair. While the NFP report showed weak wage growth at 2.4%, the upbeat ISM Non-Manufacturing PMI kept the USD head above water after a fall off late in the week.

Euro movement against the Dollar can be seen on the graph below, giving pictorial evidence to the pair behaving like a firework that just won’t go off:

EURUSD 06-11-2017.png

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I have to make some new “arrangements” and revise John Milton. Have a great week.

Written by Damien Lipman