Brexit countdown gets a legal twist

A High Court ruling has confirmed that only the parliament and not the government has the power to trigger Article 50.

A High Court ruling has confirmed that only the parliament and not the government has the power to trigger Article 50.

Therefore a parliamentary vote will be required before Article 50 is activated. The UK government will appeal the verdict and it will now go to the Supreme Court in December for review.

If upheld in December, this would lean towards of softer Brexit as the majority of parliament have a pro-EU stance. The second impact is that it will very likely delay the triggering of Article 50 due to the negotiations within parliament on agreeing the right deal.

The pound has benefitted from the news as from a financial markets perspective a softer Brexit is favoured. We can expect further short term volatility in the pound as we get further news and twists.

Interest rates left unchanged

Yesterday the Bank of England left interest rates unchanged and shifted their bias from easing to neutral which again mildly favoured Sterling. The BoE will adopt a “wait and see” approach and only if economic data markedly dips, will we see a further rate cut. It is also very unlikely that we will see any movement towards a rate hike despite higher inflation given the ongoing Brexit uncertainties.

US GDP economy grows by 2.9%

Friday’s GDP data release showed that the US economy grew at its fastest pace for 2 years in the 3rd quarter of this year.

Friday’s GDP data release showed that the US economy grew at its fastest pace for 2 years in the 3rd quarter of this year.

This positive news gives the Federal Reserve a huge backing with regards to their likely interest rate change in December. The growth was predicted to be around 2.5% but they have outdone themselves with a figure of 2.9%.

Consumer spending (making up two thirds of the world’s biggest economy) was a key factor in the positive numbers. The election campaign is expected to make for a volatile November for the dollar, but there is no major concern now for Yellen and co to make their expected move come December’s rate hike.

With a number of key figures in the UK recently resigning, being sacked or promoted, Mark Carney is said to have agreed to stay in his key role long term.

This has no doubt left some relieved as the Bank of England met with both Theresa May and Philip Hammond this week. There was some uncertainty around the Bank of England governor, but rumours have surfaced this weekend that he has agreed to stay in his position for the full 8 years expected of him.

Wise Money sees Super Thursday back this week

Super Thursday is back this week, as Mark Carney delivers what is expected to be a no change in terms of interest rates. There were hints at a second rate cut in the UK post Brexit, but a continued surprise in healthy data has left senior figures with no doubt that a downgrade in rates is not required.

Today we have Eurozone Consumer confidence, Gross Domestic Product, with German Retail Sales of note in terms of key data.

ECB monetary policy left unchanged

Sterling is higher this morning against the euro, after the European Central Bank’s (ECB) meeting at lunchtime yesterday failed to deliver any significant change.

Sterling is higher this morning against the euro, after the European Central Bank’s (ECB) meeting at lunchtime yesterday failed to deliver any significant change.
The ECB left monetary policy unchanged, as expected, with the refinancing rate remaining at 0.00% and the deposit rate at -0.4%. The euro briefly spiked higher after Mario Draghi said that there was no discussion, either on tapering the QE programme or extending it beyond the original deadline of March 2017.

Whilst sterling finished strongly on the euro, it wasn’t reciprocated on the US dollar, as strong US housing data released had the greenback soaring late in the session.

Portugal’s government bond yields at six week interst rates low

This morning, Portugal’s government bond yields are hovering near six week lows, ahead of a key review by Canadian ratings firm DBRS, out after the close of play today. Whilst this is slightly concerning for Portugal, they are expected to get through the test unscathed. If it were to be downgraded, it would fall out of the ECB’s QE programme.

Wise Money news to come

Today is fairly thin in terms of wise money news data, however we do have UK public finance figures out this morning. Whilst expected in lower than last month’s number, a lower figure shouldn’t dampen Sterling’s resurgence on the euro too much. Aside from this, most of the day will be spent interpreting the ECB press conference from yesterday, with many investors keenly watching Sterling/euro advances.

Brexit good news- Boris Johnson believes in good deal to access the single market

Foreign Secretary Boris Johnson believes that Brexit will be a good deal to access the single market. Foreign Secretary Boris Johnson believes that Brexit will be a good deal to access the single market.

After a steady flow of positive data in the UK, Foreign Secretary Boris Johnson, suggested anti-Brexit campaigners have got it wrong.

Standing in front of a select Foreign Affairs committee, he said that the EU would be wrong to ‘punish’ the UK for leaving, also commenting that Brits will still drink champagne and be the biggest importer of German cars than any other.

It’s his belief that the UK will get a good deal regarding access to the single market, whilst gaining freer access to the global market.

There’s good news for rent payers, as the rate of rent increase grew at its slowest pace in September this year, thanks to the decision of landlords to absorb the growing tax rates rather than pass them onto already high-paying renters.

With a tax reduction in buy to let properties expected in April 2017, landlords seem to have decided to let the slight increase slide, keeping tenants happier as new contracts currently average just over £900 per month. In London, the cost actually fell 0.8% which will no doubt be good news for those looking to move in the city.

Janet Yellen rounds up the week at Boston conference

After a thin day of data yesterday and slight GBP fightback, today’s US Advanced Retail Sales & the University of Michigan Confidence report are the key pieces of data available, whilst Janet Yellen finalises the weeks trading with a conference in Boston.

FED keeps loans interests rate unchanged

There was no surprise from this week’s FED meeting, as Janet Yellen announced there would be no loans interest rate hike in September.

There was no surprise from this week's FED meeting, as Janet Yellen announced there would be no loans interest rate hike in September.

The interest rate has not moved since last December’s decision to move interest rates from 0.25% to 0.5%. Another rate hike in December 2016 is now looking a shoe in.

It seems that unless global economic sentiment deteriorates in the next few months, December is seen as a good time to move again. As key data solidified in recent months, the Fed now want to see ‘economic progress’. Employment and inflation will be scrutinised until the end of the year, and the Fed members seem more aggressive as three voted to move rates, where as in July there was just the one.

UK’s public sector net borrowing falls

The UK’s Public Sector Net Borrowing fell in August, as the latest figures from the Office for National Statistics were released. The Public borrowing figure has dropped to £10.5 billion from July, down £0.9 billion from a year earlier, but the numbers had been expected to fall an additional £500 million. UK Borrowing in the present economic year to date has touched £33.8 billion, which is £4.9 billion lower than the previous year.

The ONS did say that ‘there was no clear sign of Brexit voting affecting the figures’. They also added that ‘receipts from income and corporation taxes rose strongly compared with a year ago, but VAT receipts rose at their slowest annual pace since March 2015′.

Also out was positive car production news in the UK, as car production touched a 14 year high in August. According to the Society of Motor Manufacturers and Traders (SMMT), just over 109 K vehicles were released from manufacturers hands, up 9.1% year on year.

Attention shifts to Sterling

Following a bit of an anti-climax after no policy changes from the FED on Wednesday we only saw a narrow trading range of about 100 points on the GBPUSD pairing yesterday. We surprisingly saw an even narrower trading range on GBPEUR yesterday considering we had the President of the ECB, Mario Draghi speaking at 2 pm. Further to this, he gave a speech at the first annual conference of the ESRB (European Systemic Risk Board) where he discussed overbanking in Europe and macro-prudential policy. We didn’t see too much market movement during this speech as it was mainly focussing on the broader picture of the over European banking system.

Attention focuses on Eurozone and US PMI

With not much news to drive the market today, the attention will be focussed on Eurozone and US PMI. So far, both have shown resilience in the face of the UK’s vote to leave the EU although analysts will be watching for hints of pre-election nerves within the US economy.

Bank of England leaves interest rates on hold

Wise Money is pleased with loans interest rates news from Bank of England.

Wise Money is pleased with loans interest rates news from Bank of England.

The Bank of England rate decision meeting didn’t provide any fireworks last week, as UK policymakers voted 9-0 in favour to keep interest rates unchanged. Despite signalling further rate cuts in the future, the decision didn’t come as a surprise considering the amount of stimulus they introduced last month.

The central bank is monitoring recent data closely, and they are encouraged to see that the stimulus package seems to be working, as recent data has been fairly positive and at times even better than market expectations.

It appears that investors are still not worried about the implication of the Brexit, at least until they find out what it really means. For this they will have to wait until article 50 is invoked early next year.

Busy money market data releases

It has been a very busy 24 hours in terms of economic releases. In the US, data came in softer, led in particular by a disappointing retail sales number. Headline sales were down -0.3% last month, the first decline in 5 months. Excluding autos and gas, spending fell -0.1%. Industrial production also declined in August, printing -0.4% against a market expectation of -0.2%.

It wasn’t all bad news though, as manufacturing activity encouragingly bounced back in the New York and Philadelphia regions, but it is not enough to convince investors that the FED will have enough reasons to lift interest rates next week.

Data in Europe will be quiet with final Q2 wages numbers due out in France. In the US, investors will closely look at August CPI report with market expectations of an increase of +0.1% month on month. Those numbers also match the views of our US economists. As always in the US, the University of Michigan consumer sentiment is scheduled for release.

Wise Money watches FED eyeing US data

The US FED is watching the to non manufacturing data to decide on interest rate hike.

The US FED is watching the to non manufacturing data to decide on interest rate hike.

Sterling has started the week on the front foot after last week’s positive manufacturing PMI print coupled with a better than expected services PMI sector. With Friday’s US non farm payroll data falling considerably short of expectations, the Pound rallied and GBPUSD currently finds itself trading just over the 1.33 mark.

The weak print from the US jobs data put pressure back on the Federal Reserve on the interest rate decision given that they were so heavily banking on employment numbers. At the Jackson Hole symposium last month, Janet Yellen and various Fed members were fairly hawkish on increasing interest rates but the fall in job growth has meant that analysts are now expecting the next hike in December at the earliest, if any.

However, later today, we are expecting data from the US including ISM non-manufacturing composite numbers which will be heavily watched by the markets as it could be the last resort to finalise any action from the Federal Reserve.

GDP revisions and retail PMI numbers expected from the Eurozone

From the Eurozone, second quarter GDP revisions and August’s retail PMI numbers are out today which could put further pressure on the euro. Last week’s manufacturing PMI data fell well short of expectations from the Eurozone and news flow and economic sentiment have rapidly deteriorated over the past fortnight.

Given such uncertainty, all eyes will turn to the ECB meeting later this week as markets are preparing themselves to see what stimulus measures the European Central Bank will further undertake.

In the midst of weak data from the US and the Eurozone, coupled with surprisingly positive data prints from the UK, Sterling seems to be enjoying a steady consolidation phase for the moment although any sharp moves up are fairly limited due to the uncertainty and forthcoming negotiations on how ‘Brexit’ will pan out.

A 10 year treasury gilt auction makes for the sole activity on the economic calendar for the UK today.

Wise Money waiting for key US data on Friday

Today we have US employment data which will give us a taster as we build up to the key non farm payroll data on Friday.

wisemoney US employment data which will give us a taster as we build up to the key non farm payroll data on Friday.

Feedback from the labour market is the highest consideration, as the FOMC judge whether it is appropriate to increase interest rates. On Friday the payroll data is expected to come in at a healthy 175k, and average earnings are likely to increase by 0.2%.

We could also see the unemployment rate fall slightly to 4.8% from 4.9%. If we see positive US data this week, it will build expectations for a September rate hike and lead to USD gains.

Eurozone inflation softer for August

In the Eurozone, CPI for August (y/y) has come in slightly softer than expected at 0.2% vs 0.3% expected. In addition, the unemployment rate for July has been confirmed at 10.1% which is in line with forecast. This morning the euro has been on the back foot and disappointing inflation data will not help this trend.

Pound finds tentative momentum

The Pound has managed to pick up this morning against the euro and the USD. Following a better run of UK data this week, the pound is finding some tentative momentum. Tomorrow we have UK Manufacturing PMI, and on Friday Construction PMI to give further feedback for the UK economy.

Sterling performs well thanks to record UK jobless

Sterling had a much better day trading yesterday against all its major currency pairings, as the UK Jobless Claims total fell to a record 1.64 million.

Sterling had a much better day trading yesterday against all its major currency pairings, as the UK Jobless Claims total fell to a record 1.64 million.

The numbers from April to June showed that the total fell by just over 50,000, with official figures indicating 31.75m people (74.5%) are currently in work.

Wages with and without bonus’ also showed gains, as the current claimant count for July displayed an 8,000 drop in actual claimants since the surprise Brexit vote.

Conversely Fed Reserve hints at interest rate hike

The minutes of July’s Federal Reserve meeting has hinted at another interest rate hike before the end of the year, but there was a clear division between members.

The FOMC looked to be nearing another move, as job growth and the sharp market recovery (post Brexit) has been a major factor; but a low inflation figures lack of rise, and staying towards its 2% target is still a concern.

With unemployment levels in the US below 5%, one Fed Member, Esther George, wanted a further hike in rates as ‘the economy is at or near full employment’.

Money news to come

Today we see GBP Retail Sales, Eurozone Construction Output & Consumer Price Index, along with Initial Jobless Claims and Continuing Claims.

UK interest rates cut to 0.25%

The Bank of England’s has cut interest rates by half to a new record low of 0.25%.

Bank of England’s cut interest rates by half to a new record low of 0.25%.

In addition the Bank of England (BOE) launched a massive stimulus package designed to save the UK economy from recession.

The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to slash interest rates to an all time low; they also hinted that it might cut rates “close to but a little above zero” and could unleash more Quantitative Easing if needed.

With a 60 billion government bond buying program and a new initiative to buy 10 billion pounds of corporate bonds, the Bank of England hope to support the necessary adjustments in the UK economy following Brexit.

Mark Carney and the Bank of England think that the outlook for growth has “weakened materially” and they anticipate that the pain will be felt in 2017 as their Quarterly Report shows 2017 forecast slashed from 2.3% to 0.8%, the largest downgrade to its growth forecast to date.

Inflation is forecasted to increase thanks to the weakness of the pound, with the Central Bank now anticipating to hit their 2% target in Q4 of 2017 as opposed to Q2 of 2018 as previously anticipated.

The unemployment rate is also expected to rise to 5.4% in Q3 2016 compared to a previous forecast of 4.9%.

From the US to Europe, other data to come

After Super Thursday, the market will look at the US non-farm payrolls. Following the strong increase in June, a majority of economists are now expecting a weaker number with job growth around 180,000 as Wednesday’s ADP employment report showed signs of softness in the employment components of both ISM reports.

Looking at the day ahead the rest of the data due out in Europe will be overshadowed. Germany factory orders numbers for June, the latest trade balance reading for France and the latest UK house price data are the main data this morning before the market turns its eyes to the July employment report in the US.