Public Sector Net Borrowing was up considerably from expectations, according to data released yesterday. Even though it’s the only piece of data of any note form the UK this entire week the market largely ignored it, but it did mean that the pound found little support when traders came in during the afternoon session to help the dollar stage a meaningful bout of pressure against sterling, which gave up most of the gains it had acquired over the course of the last few sessions. From a technical perspective, GBPUSD is currently just below 1.5350, which is the 200 day moving average, and a close below here will be a signal that the uptrend is over and leave the door open for further moves lower. On that basis, JP Morgan, UOB and Morgan Stanley are all short GBPUSD now, but not with much conviction – current target levels are only 1.51-1.5250. MPC member Broadbent is speaking in London on the condition of the UK labour market, which could prove interesting as wage growth is one of the major metrics cited by the BoE as holding back a rate hike.
Sentiment is pretty shot at the moment, not helped by revelations that VW have been fiddling emissions tests. To be honest, it’s quite nice to see someone other than the financial sector get pilloried by the press. Morgan Stanley released a research note that identifies what it calls “stupid” behaviour by the American consumer, ie spending money on crap they don’t need, which is generally what you see towards the end of a recovery and although the author goes on to say that this ‘end of recovery’ phase could go on for years, it’s more a case of when not if the economy takes another nosedive.
It’s PMI day in the Eurozone today, and although the euro is famously agnostic when it comes to data, there’s enough crossing the wires in a relatively short space of time so we could see some rare fundamentally-led euro moves this morning. Longer term, nothing has changed and an end to QE is still a very long way off, so it’s difficult to see how the single currency can stage much of a rally against the UK and US which are widely expected to increase their yields soon, and a flow towards higher yield is the single strongest driver of exchange rates.
Telegraph – Gloomy Chinese manufacturing outlook knocks Asian shares.
Independent – PM compares Lord Ashcroft’s claims to ‘a stab in the back’. (oink oink)
FT – Hedge fund backs Corbyn’s ‘people’s QE’.
Forex News – UK Pound Sterling, US Dollar and EUR single currency commentary provided by Argentex