A Stronger Pound on Brexit Hopes

November 22, 2018

The dollar has declined 0.7% against sterling. European Council President Tusk kindled hopes for a Brexit deal, declaring, that a deal “has been agreed at negotiators’ level and agreed in principle at political level.”

The British Ftse has fallen 1.0%, and the 10-year British gilt yield climbed four basis points.

With the United States celebrating Thanksgiving, financialĀ  market activity has otherwise been limited this Thursday. Net dollar movement overnight has been 0.2% or less versus the euro, yen, Swiss franc, loonie and Australian dollar. 10-year German bund and Japanese JGB yields are unchanged. Gold is flat, too, while WTI oil is softer. The Japanese Nikkei advanced 0.7%, but share prices are generally lower in Europe and down also in India, China, Hong Kong and South Korea.

Minutes from the European Central Bank Governing Council meeting of October 24-25 strike an upbeat tone, expressing confidence in continuing economic recovery despite trade strains and some weaker-than-assumed recent data. Quantitative bond purchases seem likely to end after December as officials have tentatively endorsed.

The South African Reserve Bank surprised markets with an unexpected 25-basisĀ  point increase of the repo rate to 6.75% after their sixth and final planned policy review of 2018. This was the first rate change since a cut of 25 basis points last March. Officials want to head of rising inflation expectations amid inflation stubbornly holding in the upper half of the 3-6% target range. The committee was divided evenly between three members seeking a hike and three others preferring no rate change. Regarding inflation, the statement observes that

The MPC noted the rising inflation trajectory which, while remaining within the target range, continues to deviate from the mid-point of the target range. The MPC continues to assess the risks to the longer-term inflation outlook to be on the upside. These risks include tighter global financial conditions, a weaker exchange rate, higher wage growth, international oil prices and rising electricity and water tariffs. However, demand pressures are still not assessed to pose a significant risk to the inflation outlook.

Japanese CPI inflation accelerated 0.2 percentage points to 1.4% in October, but core CPI, which excludes only fresh food, stayed at 1.0%. Likewise, core core inflation, which excludes energy as well as perishable food, remained very low at 0.4%.

On-year growth in Japanese machine tool orders was revised upward to negative 0.7% from minus 1.1% reported earlier. This is still down from a rise of 2.9% in the 12 months ending September and an on-year surge of 48.8% last January.

Consumer confidence in Euroland fell 1.2 points to a reading of minus 3.9 in November, according to preliminary findings. That’s the weakest point this year, lower than had been forecast, and 5.3 points below the year’s strongest confidence last February.

Danish consumer confidence continues to wane, hitting a 23-month low in November.

Turkish consumer confidence rose in November for the first time in 3 months.

French business sentiment among manufacturers edged up a point to a 2-month high in November. Construction confidence reached a 4-month high, but service-sector business confidence remained unchanged.

Swiss industrial production in the third quarter reversed the second quarter’s sharp advance, and its on-year increase dropped sharply to 1.4% from an upwardly revised 8.9% in the spring quarter.

Polish retail sales were 9.7% greater last month than in October 2017.

Icelandic wage inflation picked up to 6.2% in October.

Irish producer price deflation was a little less pronounced last month at -2.1%.

On-year GDP growth in Singapore was halved to a 2-year low of 2.2% last quarter.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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