The British pound has posted gains in the Monday session. In North American trade, GBP/USD is trading at 1.3134, up 0.46% on the day. In the US, banks are closed for Columbus Day and there are no US events on the schedule. Later in the day, the UK releases the sole event of the day, BRC Retail Sales Monitor. On Tuesday, the UK will publish Manufacturing Production, which is expected to slow to 0.3%.
The pound suffered its worst weekly decline of 2017, as GBP/USD slumped 2.4% last week. On Friday, the pound dropped to 1.3027, its lowest level since September 7. Investors remain worried about the political longevity of Prime Minister Theresa May. There were no broadsides fired at May at the Conservative party convention last week, but she still remains vulnerable to being ousted. Meanwhile, it’s back to Brexit this week, as British and European negotiators meet in Brussels. The sides are scheduled to discuss Britain’s financial settlement, one of the key sticking points between the parties. Britain is keen to discuss trade talks, but the Europeans have insisted that progress first be made on a number of issues, such as the size of Britain’s bill for leaving the European Union.
Non Farm Employment Change wiped out 33 thousand jobs in September, much weaker than the estimate of a gain of 85 thousand. However, the weak reading didn’t cause any alarm in the markets, but rather underscored the severe impact of Hurricanes Harvey and Irma, which hit the US in late August and early September. The two storms caused $150-200 billion in damage and also took a toll on the employment market, although the labor market is expected to rebound as the recovery effort intensifies. On a brighter note, wage growth accelerated to 0.5%, above the estimate of 0.3%. This reading is pointing to stronger inflationary pressure, although we’ll have to wait for additional inflation indicators, such as CPI, to gauge inflation is moving higher. There was more good news from September job data, as the unemployment rate fell from to 4.2% in September, down from 4.4% a month earlier.
