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One-man band

​​​​​​Today's news headlines:

  • ‘UK election is one pit stop in long Brexit road for Pound’. Various scenarios could play out in the coming weeks, but it’s unclear whether a Parliamentary majority for Boris Johnson will guarantee another move higher for the Pound. If the Conservatives win a majority and can pass the Brexit withdrawal bill by the end of January, the clock is still running to achieve a trade agreement with the EU by the end of 2020. The new Tory government may take a tough stance during negotiations with the EU, and this could eventually bring back the threat of an effective no-deal at the end of the transition period. (Bloomberg)
  • ‘French industrial production stronger than expected in October’. French Industrial Production data rose 0.4% in October to go with an upwardly revised 0.4% figure from September. Official stats indicated that car and pharmaceutical production both rebounded, leading to the better-than-expected performance. Car production swung from -3.4% to +3.4% from the previous month, and pharmaceuticals leapt 5.8% higher. French manufacturers had previously reported better-than-expected demand despite trade tensions and slower global growth. (Reuters)

Chewing the fat once again

Heading into tomorrow’s Federal Reserve meeting—no change expected—and Thursday’s European Central Bank Press conference—President Lagarde’s green monetary policy bent is contentious—we have a raft of data points out that can further the recession versus recovery debate in markets. 

From the EU, we’ve already had upbeat French Industrial Production data, but as anticipated, it’s been offset somewhat by the poor reading out of Italy. Even more importantly, both German and EU ZEW Economic Sentiment Surveys registered the first meaningfully positive reading since early 2018. The counterpart ZEW Current Situation Survey for Germany is still negative, but does seem to show a rebound from the low. It’s a compelling argument for a forthcoming German recovery and provides a case against the additional monetary policy stimulus implemented prior to Mario Draghi’s exit from the ECB. Consequently, the ECB press conference should certainly be that much more lively.

Bottom line: The forward-looking sentiment data does support a German/EU recovery, but we’d like to see some other metrics support that argument too. If for instance, the German Services and Manufacturing Purchasing Managers’ Index data—due out next Monday—improve, we would feel more confident that inflation, retail, and consumer confidence measures will follow suit. Until then, this a great one-man band but certainly no orchestra.


Ahead of the release of October UK GDP growth data, Sterling began the day on a muted tone, dropping close to the 1.3130 level against the Dollar. Nevertheless, sentiment for the Pound remains positive, and we’ve seen another swing higher for the pair as the market continues to show a good appetite for Sterling buyers.


This morning, the Pound was trading in a comfortable range against the common currency in the upper 1.18’s ahead of a slew of UK and European data. Sterling has benefitted more than 11% against the Euro since mid-August, and the next major point of resistance will be at the 1.20 handle, with all technical signals supporting a continuation of this rally.


Throughout much of yesterday’s session, the Euro moved lower against the Dollar despite a lack of news or data to support this move. Overnight and into this morning, the common currency has bounced back against the Dollar, bringing the 50-day moving average within touching distance of the 100-day equivalent. A crossing of these two indicators would point towards a bullish bias for the pair and may form the basis of a move higher, back above the 1.11 mark.