Weekly Market Insight

October 4th 2017

Oct 4, 2017 Written by Duncan Donald, CEO.

The Euro, naturally, started the week on the back foot after the Catalonian referendum and, more specifically, the handling of the situation by the Spanish Authorities and Government. Whilst Spain’s constitutional court had banned the referendum, over 2.2 million voters took to the polls and were met with force. Throughout this week, the EU member states have been relatively muted on Spain’s handling of the situation, but the market did react seeing EUR/USD hit a seven-week low. This move was intensified as a predominantly long market made an adjustment. Catalan leaders believe the region has earned the right for independent statehood and so await a statement from them at 9pm tonight.

In the UK, the Bank of England remain under pressure, as concerns regarding growth were fuelled after last week’s GDP and construction numbers fell below expectation. We also, more importantly, saw a slowdown in household spending, which is a true measure of the impact of inflation on households in the UK, at a time when earning aren’t matching inflation. The options available are a decrease spending, increase of borrowing or to use savings. So, whilst a rate increase can help inflation, there is a fine line between causing further damage to the indebted economy. It’s also been a tough week for Theresa May, as she hosts the conservative party conference in Manchester. She has already had to justify, to her own Party, why she doesn’t sack the outspoken Boris Johnson and even the German Foreign Secretary urged her to deal with him.

In the US, the headlines have been dominated by the terrible events in Las Vegas that occurred earlier in the week. How Trump deals with this could, of course, be crucial and it is thought that any step to review the ownership of firearms could be damning to his tenure. Data-wise, we had a strong start to the week with positive PMI’s resulting in the dollar strengthening, this in spite of Fed members Kashkari and Kaplan, showing moderate concern regarding the perceived December rate hike.

Tonight (Wednesday), we hear from the Monetary Policy Committee leaders of the US and EU. Mario Draghi is talking at 6.15pm followed by Janet Yellen at 8.15pm

Tomorrow the FOMC’s Powell and Harker speak in the afternoon, with Haldane of the UK MPC speaking in the early evening and once again on Friday morning.

Friday brings the big volatility event, with Non-Farm Payroll, Unemployment and Average earnings data.

Have a great week!

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