Yesterday saw yet another day of muted price action for the pound as the election continues to be the only game in town. Today, the Labour party is set to release their election manifesto with leader Jeremy Corbyn speaking at the launch in Birmingham alongside the shadow cabinet at 10:00GMT. Included in the manifesto is a £75bn pledge to build 150,000 new council and social homes by 2024, the biggest council house construction scheme since the mid-1900’s. Meanwhile, the Conservative party’s manifesto is expected in the coming days. Fiscal spending has been a theme of the election thus far, with all parties promising to loosen the purse strings in one shape or form, but financial markets remain unfazed with the evolution of Brexit still in limbo. The pound continues to trade in flux within a 2% range, a trend we don’t expect to change until the week prior to the December 12th election.


The single currency traded lower over the course of yesterday’s session with little incoming news. One piece of noteworthy news, however, came in the form of the European Commission’s opinion on the 2020 draft spending plans submitted by Eurozone member states. While the Commission stressed their concerns over the high levels of debt in Italy, France and Spain, they didn’t ask for changes to their 2020 draft budgets. This soothed concerns that Italy would lock horns with Brussels yet again over spending pledges. Today, a number of ECB members are set to speak while the meeting minutes from Mario Draghi’s latest monetary policy meeting are released at 12:30 GMT.


Trade optimism ebbed yesterday as trade experts and people close to the White House said the completion of a “phase one” US-China trade could slide into next year as Beijing presses for more extensive tariff rollbacks. The problem with a trade deal sliding into 2020 is that investors are left in the dark on whether the proposed December 15th tariff, which is an additional 15% tariff on $300bn worth of goods, will go ahead. The dollar swiftly recovered its lost ground following the announcement as markets then cast an eye towards the Federal Reserve meeting minutes. Fed officials stressed that threats to the US economy remained elevated but political risks to growth had eased “a bit” since the end of summer. Officials pointed towards a strong labour market and the resilience of consumer spending to signal a short-term pause in rate adjustments. Although this confirmed much of what Chairman Powell commented on in his testimonies to the legislature, a hawkish surprise seeped out of the release. The minutes showed that a couple of the Fed officials that backed a third rate cut this year back in October saw it as a close call, further cementing the likelihood of a pause in the Fed’s cutting cycle given no significant deterioration in the data or increase in trade tariffs. Today, Fed’s Mester speaks at the Financial Stability Conference. Markets may pay increasing attention to such events as the meeting minutes stressed the central bank’s concern over the elevated levels of corporate debt. The increased imbalances in corporate debt have seen the presidents of the Kansas City and Boston Fed, Esther George and Eric Rosengren, dissent from rate cuts this year as they believed lower rates encourages risk-taking which could deteriorate the quality of credit and thus increase financial instability even further.


Yesterday’s CPI data did very little for the loonie, which ultimately succumbed to the greenback’s surge to post a 0.27% loss at the close of play. Headline inflation has fluctuated around the Bank of Canada’s 2.0% mark since February this year, while the three core measures of inflation, which are used to measure the underlying inflation dynamics in the economy more accurately, have recorded values around the 2.0% mark for the last 20 months. Inflation is not the worry for the Bank of Canada when compared to the deteriorating external climate and a slowing manufacturing sector. The loonie will continue to focus on comments from BoC officials, the current account dynamics, and global growth. Following dovish comments from Deputy Governor Carolyn Wilkins, Governor Poloz will give a fireside chat at 13:40 GMT today.



This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.