Update –

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

16th October 2020

Category

Macro Commentary

The virus infection rate continues to grow alarmingly across the UK and Europe, with new lockdown measures further damaging the economy.

Data from the UK continues to be very mixed, with unemployment higher than forecast at 4.5%, but wages staying unchanged, which was slightly better than expected. Lots of data out next week including inflation, retail sales and services.

The Bank of England is now in the process of asking banks about their readiness for negative rates. However, Governor Bailey reiterated this week that the introduction of that policy is not near, and seems highly likely that such a policy, if it were to be introduced, would not be until the first half of next year at the very earliest.

The initial Brexit deadline has now passed, but negotiations will continue as they attempt to reach a deal before the transition period ends at the end of the year.

In the US, talks continue on the next economic stimulus package, but it now seems unlikely that an agreement will be reached before the election.

Biden continues to hold a steady lead in all the major polls.

On the exchanges, sterling remains highly volatile within its recent ranges, and against the hugely uncertain backdrop.

GBP/USD remains well supported around the 2-month lows of 1.2700, whilst on the topside it continues to struggle above 1.3000, ahead of the more significant 1.3250 level.

GBP/EUR rallied to a 5-week high of 1.1100 on general Euro weakness but remains within the well-established range of 1.0800 – 1.1200.

GBP/EUR – 1-year chart

Week Ahead

Date

Release

Last

Expected*

21/10/20

UK CPI YoY

0.2%

n/a

 

21/10/20

UK RPI YoY

0.5%

n/a

21/10/20

UK Public Sector Net Borrowing

35.2b

 n/a

21/10/20

UK House Price Index YoY

2.3%

 n/a

23/10/20

UK Retail Sales YoY

2.8%

 n/a

23/10/20

UK Markit Manufacturing PMI SA

54.1

n/a

23/10/20

UK Markit/CIPS Services PMI

56.1

n/a

23/10/20

UK Markit/CIPS Composite PMI

56.5

 n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.1710

AUD/USD

0.7090

GBP/USD

1.2910

USD/AED

3.6730

GBP/EUR

1.1030

GBP/AED

4.7400

USD/CHF

0.9155

EUR/AED

4.3000

USD/JPY

105.30

XAU/USD

1906

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

5832

-22.67%

S&P

3483

+7.82%

EUROSTOXX

3192

-14.76%

DFM GENERAL INDEX

2194

-20.62%

UK Benchmark Rates

Libor

 

Swap Mid

 

3 month

0.04575%

2 year

0.08%

6 month

0.07725%

3 year

0.12%

12 month

0.12975%

5 year

0.19%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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