Market Review – Fundamental Perspective 13 October 2017

Asian equities were mostly firmer while European equity futures traded slightly higher. The S&P 500 edged lower, following a run of gains in global stocks this week. The USD and UST yields remain poised to end four weeks of gains as confidence in American tax-cut plans waned somewhat and the Federal Reserve signal that several policy makers are cautious about an interest-rate hike before year-end.
In FX, GBPUSD saw choppy moves
yesterday after trading in an upward trend this week on a softer USD, driven by the FOMC’s recent dovish minutes. GBP aggressively sold off on comments from EU's chief negotiator Michel Barnier who said there was “deadlock” on the Brexit financial settlement. Later in the day, this reversed with GBPUSD rallying c. 100 pips after Handelsblatt (German Newspaper) claimed that Barnier could offer the UK a 2-year transition stay in the EU market as long as Britain meets financial obligations.
EURGBP initially broke above recent range highs at 0.9000 on Barnier’s initial comments, to highs of 0.9033 (Bloomberg), but then reversed back below recent range support of 0.8900. Our traders see GBPUSD support at 1.3100 and 1.3000, whilst resistance is at 1.
3500.
Focus turns to US retail sales and consumer price data today. US retail sales are expected to pick up in today’s print for September, along with US CPI. We are in line with consensus for September CPI at 2.3% y/y (1.8% y/y for core CPI), but slightly stronger on retail sales at 1.7% m/m (0.9% ex. autos). Also today, markets await three Fed speakers including Evans, Powell, and Kaplan.

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