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16 October 2019

Sterling

Sterling shrugged off sluggish inflation data as it surged to fresh cycle highs against both the dollar and euro. CPI rose by only 0.1% last month while the annualised headline reading failed to match expectations of a rise to 1.8% in holding steady at 1.7%. Core inflation did meet expectations in rising from 1.5% to 1.7% but it was growing optimism that a Brexit deal is coming which propelled the pound higher. Early this morning, Northern Ireland’s DUP released a statement saying it cannot support PM Johnson’s new deal as things stand and this has taken some of the steam out of sterling’s advance.

Euro

In similar vein to sterling, the euro was supported yesterday by apparent progress on Brexit talks. A weaker dollar was also in play as were headlines from Germany where officials were cited as saying they could provide fiscal stimulus if growth and the economy in general deteriorate further.

US dollar

Last night’s Fed Beige Book reported the economy expanding at a modest pace but by that time the damage had been done as a hideous retail sales report saw the prospect of a rate cut at the end of this month rise once again. Headline sales fell by 0.3%, the first decline in 7 months but although revisions countered some of the negativity, the fall in spending will not go unnoticed at the Fed. The dollar was broadly weaker as a consequence.

Data and events

UK retail sales are released this morning along with a slew of second-tier data from the States this afternoon but the focus will really be on day one of the EU Summit and what will no doubt be another plentiful supply of Brexit headlines.

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