IFX Market Report
Wednesday 11th October 2017

Market Report

Sterling remained well supported on Tuesday after positive industry data surpassed forecasts, further strengthening expectations that the BoE will raise rates in November. Factories had their strongest 2 months in July and August, year on year scope output was 2.8% higher. The construction sector grew for the first time in three months 3.5% vs 0.2% signifying a less weak economy that previously thought.

The UK trade deficit widened in August to double the forecast of £2.8bn to come in at £5.6bn from £4.2bn posted in July. Markets had expected the deficit to fall but a 3.1% increase in imports tipped the balance.

The pound opened 1.1193 against the euro and continued to rise to the day’s high shortly after the data release to 1.1202 before political instability and trader sell offs helped erase some of the gains and the pair closed at 1.1197.

Against the US dollar, the pound maintained the overnight gains an opened 1.3142 and continued to climb on the dollar to close near the day’s high of 1.3222.

Worldwide News

The euro hit a 1-week peak on Tuesday as Germany logged its strongest export figures in a year for August rising 3.1% and expectations grew over scale back in asset purchases after ECB executive board member Sabine Lautenschlager called for a rollback on purchases in 2018. Focus is shifting away from political unrest and towards economic data, which appears to be strengthening the currency ahead of the ECB meeting on 26th October.

The US dollar continued to fall on the aftermath of the Non-Farm Payrolls retracement and ongoing concerns over North Korea’s nuclear weapons programme. In addition, the much anticipated tax overhaul plan was also placed into jeopardy as President Trump argued a recent statement from an influential Republican Senate was detrimental to the tax reform.

On that consideration the pair opened at 1.174 and continued to strengthen to the day’s high 1.1818 before settling at a close of 1.1800.

Consumer sentiment in Australia rose for the first time since November, The Westpac-Melbourne Institute Index rose 3.6% to 101.4 in October from 97.9 in September following yesterday release of improved Business Confidence. The rise is sentiment was driven by an improvement in the job market. GBPAUD touched a low of 1.6938 after the data.