Political uncertainty weighs on Sterling (with video)

Figures from the largest Eurozone economies, Germany and France, showed further weakness yesterday as PMI Manufacturing stagnated. It managed a meagre 50.4 versus a 50.9 forecast while PMI services declined to 51.3 from the 52.3 expected. This is the weakest reading in 16 months and it shows that the Eurozone is once again flirting with recession. The most concerning data was German PMI Manufacturing which read just 50.0 – the level that marks growth and contraction. The weakness in Germany might help support the case for the ECB to try and launch some sort of QE programme.
 
In the UK, retail sales rebounded after a sharp dip in September. Retail sales volumes in October were 0.8% higher according to figures published yesterday by the Office for National Statistics. Despite the good news, this failed to erase the sharp dive in September which was widely blamed on the warm weather, delaying winter clothing purchases. Food stores in particular continue to struggle as the main stores face tough competition from discounters such as Aldi and Lidl. On the back of the better than expected retail sales, the pound managed to strengthen slightly but Sterling is still feeling the pressure from the political battle over UK membership in the EU and the political election next May.
 
In the US, CPI figures were studied closely by the market. This outlook of monetary policy normalization is one of the dollar’s primary drivers and that has already been priced in by the market. For the headline measure (including energy and food), there was no growth over the month but the year-over-year held at 1.% to October and core inflation ticked up to 1.8%.
 
The data calendar is thin today (21 November) with UK public sector net borrowing for October and inflation figures out in Canada.

         {^youtubevideo|(width)560|(height)340|(rel)True|(autoplay)False|(fs)True|(url)http://www.youtube.com/watch?v=7fPGvdcLPAM|(loop)False^}