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Weekly Report 11th – 15th November

GBP

Trading closed on Friday evening as a whimper rather than a bang as GBP continues to trade in correlation to polling forecasts which have been showing a stabilisation of the Tory vote and no improvement to Labour and Liberal Democrats. Over sensitivity for GBP towards polling is purely down to market fear of Corbyn’s left-leaning economic policies and expectation that should the conservatives achieve a majority, then the Brexit withdrawal bill approval is merely a formality and can pass though the commons unimpeded.

Last week the Bank of England resisted the temptation to cut rates and join the global shift towards a cutting cycle, citing that should Brexit materialise with a deal, then this may unleash a wave of pent up investment, propelling the UK economy into a desirable growth range rather than this stagnating environment which BOE member Michael Saunders commented, was like a “slow puncture”.

In the run up to the decision GBPUSD was fairly stable around the 1.2850 – 1.29 level, however when the decision was released and it was apparent that 2 members dissented and voted for a cut, GBPUSD fell to a low of 1.2780 before recovering to 1.28.
UK GDP arrived at 0.3% this morning versus 0.4% forecast, crucially the UK economy averted a technical recession which should theoretically stabilise GBP whilst the political plates continue to move. GDP at the moment, according to the BOE and their forecast is highly contingent on the Brexit path, this graphic illustrates exactly how much

USD

Apparent unrest in the White House due to the announcement that the US will rollback tariffs have added fresh doubt that phase one of the trade deal can be signed. Peter Navarro, the White House’s economic adviser poured cold water on the deal stating there are no plans to remove levies in stark contradiction to recent headlines. Beijing, who also had expressed optimism about working towards a gradual removal of duties has been eerily silent of late, adding to speculation that this phase of the trade deal shall remain incredibly hard to reach.
Looking forward this week, on Wednesday we’ll understand the inflation picture in the US, which could vindicate the Federal reserve’s decision to cut rates last week. Also, testimony from Federal Reserve Chair on Thursday and on Friday the strength of the US consumer shall be put to the test with monthly retail sales data to be released.


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