Macro Commentary

The US-China trade talks continue to dominate market attention, but despite some positive comments, we have seen no tangible progress as yet.

The Fed minutes this week showed no real surprises, as the committee remain in data-dependent mode. The market is, however, pricing in an 80% chance of a further interest rate cut at the end of this month, on increasing concerns of a global economic slowdown.

The Brexit negotiations are at a critical stage with the EU summit starting on the 17th October, and parliament sitting on the 19th October to decide the UK’s next actions. The law requires the UK to request an extension if no deal is reached, but much could change over the coming week. Positive comments from talks yesterday between Boris and the Irish prime minister did give some cause for optimism.

On the exchanges, there remains a lack of conviction and trading volumes remain light on the ongoing political uncertainty, and growing geopolitical risks.

GBP/USD did rally strongly yesterday following the positive Irish comments. There continues to be interim support at 1.2200, ahead of the critical & psychologically important 1.2000 level. On the topside, we would need a break through 1.2550 to alleviate the current negative sentiment.

GBP/EUR continues to have strong buying interest ahead of the important 1.1000 level, whilst 1.1400 continues to cap the topside.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
15/10/19 UK Average Weekly Earns. 3M/YoY 4.0%  4.0%
15/10/19 UK Unemployment Rate 3.8% 3.8%
16/10/19 UK CPI YoY 1.7%  1.9%
16/10/19 UK RPI YoY 2.6%  2.7%
16/10/19 EU CPI YoY 1.0%  0.9%
17/10/19 UK Retail Sales YoY 2.7%  3.1%

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1010 AUD/USD 0.6780
GBP/USD 1.2455 USD/AED 3.6730
GBP/EUR 1.1315 GBP/AED 4.5750
USD/CHF 0.9975 EUR/AED 4.0440
USD/JPY 107.95 XAU/USD 1502

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7166 +5.55%
S&P 2938 +16.11%
EUROSTOXX 3514 +14.19%
DFM GENERAL INDEX 2810 +11.07%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.77375% 2 year 0.73%
6 month 0.82900% 3 year 0.71%
12 month 0.88538% 5 year 0.71%

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