Sterling rose sharply yesterday after Nigel Farage announced the Brexit Party would not be contesting Conservative Party seats won in 2017. GBPUSD rose more than half a percentage point on the news, but began paring back its gains immediately, and as of the time of writing as all but completely reversed them. At first glance Farage’s announcement increases that chances of a Conservative Party majority at the upcoming General Election. Sterling’s initial positive reaction to the news suggests that market participants view the prospect of a Conervative Party majority positive for the pound, and that a victory in December could see further gains for sterling. The transitory nature of yesterday’s move means this proposition should be taken with a grain of salt as always. Yesterday’s data included some a first look at 3rd quarter GDP, which rose 0.3% on the quarter, slightly better than expected. Business Investment changed 0.0%, in fact much better than the 0.5% contraction that was expected by forecasters. This morning’s labour market data showed Average Weekly Earnings up 3.6% year on year, and a smaller than expected net contraction in employment in the three months ended September.


The euro continued to trade in a tight range against the dollar yesterday, but participated in the choppy sterling price action seen in the wake of political developments in the UK. This morning’s main release will be the ZEW Economic Sentiment Survey of investors and analysts at 10:00 GMT. The widely followed German survey has been showing a mild improvement in expectations in recent editions, despite respondents assessment of the current situation remaining at recessionary levels.


Dollar price action was subdued yesterday, as the US enjoyed the Veterans Day holiday. Today’s calendar begins to heat up, with Fed policymaker Clarida speaking at 10:30 GMT, and the NFIB Small Business Index – considered a good leading indicator of the US economy due to the importance of small business in hiring and investment – released at 11:00 GMT. President Donald Trump will make some brief remarks at the Economic Club of New York at 17:00, an occasion for potential market moving comments on US-China trade.


The loonie traded flat yesterday as Canadians enjoyed Remembrance Day, but has opened on the back foot this morning and has weakened against the US dollar. No economic data will be released today.



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