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Trump moves closer to Fed Chair nomination

By Hamish Muress

It was a very quiet start to the week for the pound with only the latest insight into UK factory growth being released. According to the survey from CBI, optimism in the manufacturing sector has fallen to its lowest level since July 2016. Alongside this and rather unsurprisingly after the weekend’s activities, UK Prime Minister Theresa May reiterated in front of MPS that the country is within ‘touching distance’ of moving on to the next stages of Brexit talks. The Bank of England’s Jon Cunliffe also spoke yesterday, warning that the UK economy has clearly slowed. Following last week’s poor data, Cunliffe certainly has a point, however the market is generally seeing November’s potential interest rate hike as a step out of ‘emergency mode’. However the pound shrugged off Cunliffe’s comments, given his dovish predisposition.

 Over in the US, President Donald Trump told reporters that he is ‘very, very close’ to making a decision regarding his Federal Chair nomination. Whilst current Fed member Jerome Powell is seen by many as the best continuity candidate should Yellen not be nominated, there are concerns within the White House that his nomination may not be successful due to the fact that a number of high ranking Republicans voted against him when he was nominated by former President Obama for his current role. That leaves the very hawkish John Taylor. The US Dollar lost some ground late last night as these rumours circulated and whilst the moves were not significant the market definitely has jitters as it tries to discern between hawkish and dovish candidates as well as Trump’s rhetoric.

Eurozone confidence amongst consumers hit a 16 year high yesterday due to small increases in inflation and wages. Employment expectations also remain strong and Q4 for the Eurozone has started well. If energy prices fall before the end of the year, European consumers will have been sitting happy in the run up to the end of the year. However over in Spain, Q4 could certainly turn out differently (Spanish 2018 GDP forecasts have already been revised downwards). Yesterday Catalan officials said that they would not follow the orders of Madrid but rather the ‘will of the people’. Whilst this is very poetic discourse Spain is heading (to steal a phrase) towards a cliff edge. 

Australian consumer confidence has edged up marginally ahead of the week’s big release of inflation figures. Australian bank Westpac predict that the figures will struggle to meet market forecasts due to subdued price pressures in the retail sector. GBP/AUD has opened around the 1.69 mark this morning but expect some movements tomorrow.

The Kiwi has continued its decline overnight as New Zealand Prime Minister Ardern announced that she intends to review and reform the Reserve Bank Act. Of particular note to the dollar’s performance is the intention to add the employment mandate to any future RBNZ decisions.