Sterling participated in the broad dollar weakness seen late yesterday afternoon to break out of its trading range of the past couple of days and close higher against the greenback. The day’s data releases were far from inspiring. The Royal Institute of Chartered Surveyors House Price Balance showed the housing market slipping ahead of the general election, as the House Price Index fell to -5%, while the net balance of survey participants reporting an annual decline of enquiries from new balance fell to -16%. ONS Retail Sales figures showed sales contracting 0.1% in October, worse than expected, after a flat month in September. On the political front spending promises continue to flow freely from both sides of the political spectrum, with Labour pledging to nationalise the Openreach network and deliver free broadband nationwide, and the conservatives pledging a relatively tame £500m to reverse cuts to rail services in the Midlands and north of England.


The single currency capitalised on the dollar’s weakness yesterday after a very limited reaction from Germany’s GDP data. There was very little headline data for the euro after the announcement that Germany narrowly avoided slipping into a technical recession yesterday. Looking at the chart, however, the euro rally over the course of yesterday’s session was the largest in 9-days at a measly 0.14% and potentially marked an inflection point in EURUSD as the recent downtrend looks to fizzle out. Today, the euro’s rally may be tested with the final reading of October’s Eurozone CPI at 10:00 GMT.


The dollar weakened across the board yesterday, posting gains against the Antipodean currencies only yesterday. The Japanese yen was the best performing G10 currencies yesterday as reports emerged that the US and China are struggling to finalise the first phase of the trade deal. The risk sentiment deteriorated further with poor economic data released from China and another build in crude inventories pushing oil lower too. Jerome Powell’s testimony to the House Budget Committee yesterday was a lot of the same as it mimicked Wednesday’s commentary to the Joint Economic Committee. All in all, it has been a fairly quiet week for the dollar, but the greenback has started Friday on the front foot following positive trade comments from Trump’s economic adviser Larry Kudlow. Trade talks are down to the “short strokes” according to Kudlow and officials are talking daily. Today, the US data calendar includes retail sales, industrial production and manufacturing data for October. Retail sales are expected to pick up from weather-related weakness in September despite a modest drag on the headline from gasoline prices. The headline rate is expected to increase from -0.3% MoM in September to post 0.2% growth in October.


The loonie made marginal gains yesterday despite falling to one-month lows mid-session as broad dollar weakness helped pull it from the doldrums. Oil prices took another leg lower yesterday as US inventory data showed another slump in demand with inventories building for the third week in a row.



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