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FCP Daily Market Update

19 October 2018

Currency pairs were confined to tight ranges yesterday as the dust settled on FOMC minutes and lack of progress on Brexit. There was a notable soft tone to the dollar but sterling help up well again despite weak retail sales data. September sales fell by 0.8%, double the expected decline but the 3.4% year on year rise was the strongest since the end of 2016 which deflected from the disappointing headline.

Into the afternoon session, and it was a different story for sterling as it drifted lower despite ongoing optimism from UK PM May on Brexit. The EU and financial markets are at odds with her upbeat outlook with a workable solution on the Irish border no nearer and the ‘option’ of an extension to the transition period unlikely to please either side.

After a few days of stability, risk sentiment crumbled again yesterday as a combination of global growth fears and a backlash over the Italian budget proposals hit investor confidence. The Fed’s desire to normalise interest rates at a time when the rest of the world is on a different cycle is having an adverse effect and overnight data showing growth in China slowed to its lowest level in 9 years further highlights the concerns over the trade dispute. Meanwhile, the EU Commission has reportedly asked the Italian government to review their budget plans or risk it being rejected.

It’s a quiet end to the week on the data calendar and neither UK government borrowing figures nor existing home sales from the States should have much market impact.

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