31/10/2018 - Pound Spooked Despite Upbeat Budget

GBP

Yesterday saw the Pound sink to new lows as concern about Britain’s departure from the EU led investors to overlook the upbeat budget announcement by Philip Hammond. October has seen a long losing streak for Pound Sterling, as traders have seen any Brexit optimism replaced by fears over the lack of progress on the Irish Border.

The budget on Monday had hinted at higher spending and continued economic growth, but traders on Tuesday focused more on the sentiment that this would hinge on London getting a trade agreement with Brussels. It seems that the Markets remain of the opinion that the British economy will only be able to benefit from the Budget proposals if an orderly Brexit is achieved.

Theresa May also reiterated that “there will be no second referendum on Brexit” whilst she appeared at a session of the Nordic Council held in the Norwegian Parliament.

EUR

Yesterday also saw disappointing euro zone preliminary Gross Domestic Product (YoY Q3) data as the figure came in at a weaker 1.7% against an expected 1.8%. The euro zone grew less than expected in the third quarter as the public mood turned darker, with signs of distress in Italy at the forefront of concerns that the third largest euro zone economy was becoming one if its weakest links.

USD

U.S. consumer confidence rose to an 18-year high in October, a further data release pointing to an increasingly strong dollar. This rise was driven by a robust labour market, suggesting that strong economic growth could persist in the near term. Donald Trump looks set to remain on course for a collision with the Fed, as these data releases are not a breeding ground for lower interest rates.

Key Announcements

11.00 - EUR: Consumer Price Index (YoY) (Oct); expected to increase to 2.2% from 2.1%
11.00 - EUR: Core Consumer Price Index (YoY) (Oct); expected to increase to 1.0% from 0.9%