Macro Commentary

The election date has been set for the 12th December, with parliament being dissolved next week, so the campaigning can begin.

Sterling will likely be trading in reaction to the polls, with signs of a Conservative majority likely to lead to further sterling gains.

In the US, the central bank cut rates again this week as widely expected, with chairman Powell describing it as insurance against ongoing risks, namely low inflation, slowing global growth and trade concerns. He also reiterated the underlying US economy remains strong.

It does appear some progress has been made on the US-China trade talks, which continue to be a key driver of market sentiment.

Whilst in Europe, Lagarde called on Germany to use its budget surplus to fund investment, to help stimulate the economy.

On the exchanges, sterling has been underpinned by the election announcement, with polls currently showing the Tories would gain a majority.

GBP/USD remains well supported around 1.2800, whilst the psychological 1.3000 level remains the initial topside point to watch. A closing break here would target 1.3250.

GBP/EUR has some decent buying interest ahead of 1.1400, but has so far lacked the momentum to break the recent highs around 1.1660. The medium-term target remains at 1.1800.

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
4/11/19 UK Markit/CIPS Construction PMI 43.3  44.0
5/11/19 UK Markit/CIPS Services PMI 49.7 49.8
5/11/19 UK Markit/CIPS Composite PMI 49.3  49.1
7/11/19 UK Bank Rate 0.75% 0.75%
7/11/19 UK Bank of England Inflation Report

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1160 AUD/USD 0.6905
GBP/USD 1.2965 USD/AED 3.6730
GBP/EUR 1.1620 GBP/AED 4.7630
USD/CHF 0.9860 EUR/AED 4.0990
USD/JPY 108.00 XAU/USD 1513

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7269 +8.83%
S&P 3037 +20.08%
EUROSTOXX 3612 +20.34%
DFM GENERAL INDEX 2746 +8.54%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.80925% 2 year 0.77%
6 month 0.87625% 3 year 0.77%
12 month 0.97163% 5 year 0.76%

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