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By xemarketanalysis November 13, 2017 4:08 pm
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    XE Market Analysis: Sterling and May Under Pressure

    OVERVIEW

    • Political concerns are weighing heavily on the Pound with Brexit risks increasing.
    • US Dollar is quiet so far, sentiment looks slightly soft due to tax reform doubts.
    • IMF says Europe's growth is "stronger" and warns disruptive Brexit could result in "appreciably" lower growth. 
    • Central bankers gather in Frankfurt to discuss the global economy and inflation.
    • Global stock markets are lower, while oil prices have steadied near 2-year highs.

    HIGHLIGHT

    The UK’s political situation remained in focus over the weekend after 40 MPs signed a vote of no-confidence on Theresa May. The vote is 8-short of triggering a leadership contest, which requires 15% of Conservative MPs, but has added to a sense of disarray in the government, and the Pound is down sharply as a result. Brexit minister, David Davis, said yesterday that Britain will not offer a figure for how much it believes it owes the EU after it demanded that the UK spell out its approach to the final bill to unblock talks. 

    US DOLLAR

    The US Dollar is relatively stable after slipping against most of its major counterparts last week due to skepticism that the tax reform will be passed before the new year as the two Republican lead legislatures put forward differing bills. After a lack of economic data last week, we have consumer price inflation, retail sales, and housing market data this week. Tax reform will continue to be a major market variable as the two sides attempt to align their legislation in time for Thanksgiving.

    BRITISH POUND

    The Pound is off its lows for the day where it was down 1% versus many of its major counterparts but remains down around 0.5% as questions grow about Theresa May's position as Prime Minister. This week we have inflation, employment, and retail sales data that look likely to play second fiddle to politics. 

    EURO

    The Euro remains stuck in a very limited range with buying interest emerging on dips below 1.16 but running out of steam below 1.17. As well as tomorrow's gathering of central bankers in Portugal, the key highlights this week will be the second estimate of quarterly GDP on Tuesday, and the final reading of annual CPI on Thursday, that is expected to show underlying inflation slowed to 0.9% in October.

    CANADIAN DOLLAR

    The Loonie is weaker against its US counterpart paring some of its recent gains despite higher oil prices as uncertain prospects for a US tax overhaul weigh on risk appetite. Manufacturing sales data for September is due on Thursday, and the October inflation report will be released on Friday. The inflation report is expected to show annual CPI to have cooled to 1.4% and to leave the BoC plenty of room to keep interest rates on hold for now.

    AUSTRALIAN DOLLAR

    The Aussie Dollar remains pinned toward a major level of support versus the US Dollar at 0.7630, as its yield advantage continues to narrow and risk aversion weighs. Employment data is the key highlight this week, with wages in focus after 4 quarters of record low wage growth.  

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