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FX

Strong US Data did Little for the USD

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Strong US Data did Little for the USD            

  • Strong US data did little for the greenback. Industrial production, on broad based strength, rose 0.3%MoM in September. That was stronger than consensus for 0.2%, with Citi analysts believing that economic growth is robust and the expansion in capital investment continues. Also, Jolts job openings followed, rising from 6.939 to a record high of 7.077mn. Lastly, NAHB housing market index unexpectedly rose to 68 in October; the first gain five months.

 

  • So far, tensions have not escalated between US and Saudi Arabia. US Secretary of State Mike Pompeo met on Tuesday with Saudi Arabia's King Salman over the disappearance and alleged murder of Saudi journalist Jamal Khashoggi. A Saudi official told Bloomberg on Monday that authorities were launching an internal investigation and could hold people accountable if evidence warrants.

 

 

EUR: Italy submits draft budget plan

  • Italy has submitted the draft budget plan to the European Commission. Italy ratings reviews from S&P (October 26) and Moody’s are due later this month. Citi analysts believe that the EU is likely to reject the plan in the next couple of weeks, which is however unlikely to force the government to backtrack. A formal Excessive Deficit Procedure is likely to be proposed by end-November.

 

  • Europe data was discouraging to say the least. Specifically, the ZEW survey current situation index fell to 70.1 in October vs 74.4 consensus expectations. Even worse is the investor expectations that fell to -24.7 vs -12 consensus forecasts. This is the same record low we saw back in July. “Expectations for the German economy are dampening above all due to the intensifying trade dispute between the US and China,” ZEW President Achim Wambach said in a statement. However sentiment was also impacted by the danger of a ‘hard Brexit’ and the political situation in Germany. Unfortunately, all three factors risk getting worse before they get better.

 

 

Brexit saga continues as the EU Summit kicks off

  • In UK, May has headed off any prospect of mass Brexiteer resignations by rejecting the agreement reached by negotiators in Brussels at the weekend. Eight Brexiteer Cabinet ministers attending a meeting last night to discuss their concerns – however reports suggest that they will stick to supporting May, for now. We are approaching crunch time - which means this is one of the last chances for third parties to be influential, be it the Brexiteers in the Conservative Party or the DUP.

 

  • UK wages are now growing faster than prices with average weekly earnings ex bonus rising 3.1% in the three months through August, the most since January 2009 and beating expectations of an unchanged 2.9% increase. The rest of the employment report was in line with expectations. Citi analysts believe that the BoE may be encouraged by wage growth, but it is unlikely to hike anytime soon .

 

 

Commodity Bloc: Inflation in New Zealand beat expectations

  • AUD: The release of the October RBA minutes were a non-event as expected. The central bank reiterated that the next move in the cash rate “more likely to be an increase” but, given only gradual progress on unemployment and inflation.

 

  • NZD: CPI beat expectations, climbing 0.9% in Q3 vs 0.7% consensus forecasts. This resulted in NZD jumping to 0.6590, although there has been little appetite to test 0.6600

 

 

Asia EM: Focus turns to China’s inflation data

  • CNY: CPI increased from 2.3% to 2.5%, in line with expectations. PPI declined to 3.6% from 4.1%, but was slightly higher than market consensus of 3.5%.

 

 

This is an extract from the Daily Currency Update, dated 17th October 2018. Please approach a Citigold Relationship Manager if you would like more information

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