Market Review – Fundamental Perspective 15 November 2017

The weakness in risk assets extended into another session, with global equities extending declines in Europe and Asia. In FX, EURUSD rallied above 1.1800 with the fixed income move acting as the initial catalyst and aided further by robust Euro Area data. Meanwhile, the ECB’s conference on central bank communications failed to provide any market-moving headlines.
Our traders think the rally in EURUSD was attributed to a structural move - assisted by strong Euro Area GDP data - given the lack of retracement and consistent EUR demand seen from a range of client bases. We see EURUSD support at 1.1737 (100dma) ahead of 1.1660 and 1.1550, whilst resistance is at 1.1835-80 ahead of 1.2000 and 1.2100.
The flash reading of Q3 GDP in Germany pointed to growth of 0.8% q/q vs. consensus forecast of 0.6%. In Italy, GDP expanded 0.5% q/q in Q3, in line with consensus and our economists.
Meanwhile in the UK, inflation came in below expectations at 3.0% y/y (headline CPI) vs. consensus expectations of 3.1%y/y, which is an early challenge to the Bank of England’s recent hawkishness.
Following the print, GBP came under pressure trading lower across the board but the sell off was limited. GBPUSD continues to trade broadly within the 1.3000-1.3300 range. Meanwhile, EURGBP trades in line with the broader EUR bid tone, with short term support at 0.8935 and resistance at 0.9025.
Focus today is on a busy day of data. This morning, we look to UK employment data, where we are slightly above consensus in expecting Average Weekly Earnings to remain at 2.2% 3m/y as unemployment remains at 4.3%. This afternoon, attention turns to US CPI.

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