Market Review – Fundamental Perspective 16 November 2017

European equity futures gained marginally after Asian equities rebounded after four days of declines. Oil steadied near $55 a barrel and gold eased for a second day. In FX, the USD remained under pressure as US fixed income rallied, with UST yields rallying c.5bp.
September’s UK employment report was mixed yesterday. Headline ILO unemployment rate for September printed at 4.3%, stable since July. The report showed slowing employment growth (second negative print in a row of -59k 3m/3m) reversing some of the strength seen earlier this year. Meanwhile, an absence of upside pay momentum continued with average weekly earnings printing at 2.2%, only 0.1pp higher than their six-month average, contrasting with the current strength in inflation.
GBP initially declined following the report, but overall markets reaction was limited as the report was interpreted by markets as a non-event. Instead, price action remains EUR and USD driven in the short term, with levels being held in both GBPUSD (1.3000-1.3340) and EURGBP (0.8730-0.9050).
Focus turns to UK retail sales data which are due today. Beyond data, our traders think GBP is likely to be driven primarily by Brexit and the December talks in the coming months.
In the US, Headline CPI increased a modest 0.1% m/m and core inflation accelerated to 0.2% m/m in October. Meanwhile, US Retail Sales were stronger than expected in October printing at 0.2% m/m in October, vs. 0.0% consensus expectations.
Looking to the day ahead, the US House of Representatives aims to vote on its version of the tax reform bill today. Meanwhile the Senate Finance Committee is expected to vote on its markup of the bill this week, with a full Senate vote expected after the week-long Thanksgiving recess.

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