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There are several key economic readings this week
In a day packed with economic data and in the shadow of an interest rate cut, pause or raise midweek, the pound remained stable against all but the US dollar, against which it strengthened by just less than 0.50%.
There was a mass of data from the eurozone (and that continues today), starting with Germany’s economy shrinking by 0.1% in the third quarter (Q3, July to September). However, this was viewed as less bad than it could have been, and was followed up in the afternoon by Germany’s inflation rate falling ahead of expectations to 3.8%. That’s a drop from 4.5% last month, and is close to Spain’s 3.5%. Watch out for GDP and inflation data today.
The dollar was the loser overall, despite an almost complete lack of data. The dollar’s weakening could be blamed on an increasingly ‘risk on’ sentiment as fears of the Israel-Gaza war spreading lessen. However, the World Bank did warn, yesterday, that if it does spread then the oil price could hit $150 per barrel. The markets are also considering the interest rate decision tomorrow, Non-Farm Payrolls on Friday and bond-market turbulence more generally. There is a lot happening this week.
To help make sense of it all, download the new Quarterly Forecast, and see rate predictions for the quarter and year ahead.
In Russia, in an attempt to shore up the rouble, new capital controls will prevent or restrict Western companies from withdrawing their money from the country in euros or dollars. Russia’s central bank raised its interest rate to 15% on Friday, as the rouble hit its lowest rate against the dollar since the very start of the Ukraine War.
In business news, a cap on bankers’ bonuses will be scrapped today. It has been blamed for lowering the competitiveness for the City for the best bankers.
In the US, the long-running car worker strike looks set to end after a climbdown from the car companies that will involve pay raises of roughly 25% over four years.
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GBP: House prices continue to fall across England
The first data of note in the early part of the week was housing numbers. Yesterday Zoopla revealed that house prices are falling in most of the country, especially in London and the south. However, prices were falling in only 38% of local authority areas in Scotland, and the north east and north west of England also fared relatively well (though still falling overall).
Remortgaging levels fell sharply, to their lowest levels since January. Tomorrow there will be the Nationwide House Price Index, with prices expected to still be falling at around 5% per year.
One number rising by around 5% is shop price inflation, as revealed by the British Retail Consortium this morning. Prices were rising by 5.2%, down from 6.2% last month, and with homegrown food actually falling in price.
GBP/USD past year
EUR: Positive start for euro as data piles in
Yesterday was a good day for the euro, powered by better-than-expected data from the eurozone’s largest economy, Germany. EUR strengthened by 0.5% against USD and by 0.8% against CNY.
We have just had a reading for French GDP of 0.1% growth for Q3 (no surprises there, but a fall nonetheless) and will get France’s inflation data shortly as well as Italy’s and the eurozone’s as a whole.
By the end of the day the markets will have a much better understanding of the state of the euro area economy.
USD: Market jitters sink dollar
The dollar fell across the board yesterday, in a day without any high-level data from the US side.
This afternoon we will get some housing market numbers, and tomorrow is the first of two key labour market readings: JOLTS job openings.
There will also be ISM Manufacturing PMI tomorrow, but the main event will of course be the interest rate decision, followed by Non-Farm Payrolls on Friday.
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