The British pound is almost unchanged in the Monday session. In the North American session, GBP/USD is trading at 1.3279, down 0.01% since the Friday close. On the release front, there are no major events in the UK or the US. British Rightmove HPI rebounded in October with a gain of 1.2%, marking a 5-month high. In the US, the Empire State Manufacturing Index soared to 30.2 points, easily beating the estimate of 20.3 points. This was the indicator’s highest level since 2009. On Tuesday, the UK releases a host of inflation indicators, led by CPI. The markets are expecting inflation to hit 3.0% in September, up from 2.9% a month earlier.
The Brexit talks are in trouble, as the sides have made little progress after several rounds of negotiations. Prime Minister Theresa May is hopeful of generating some positive momentum, as she meets on Monday with EU Commission President Jean-Claude Juncker and EU chief negotiator Michel Barnier. The Europeans have insisted that there must be progress on a number of issues, such as Britain’s divorce payment, before they will discuss a trade deal. The EU holds a summit on Thursday, and could announce that they won’t talk trade until next year. Both sides have been talking about the possibility of a ‘hard Brexit’ in which Britain would leave with no deal being reached, but British businesses are dead set against such a scenario, and are pushing for a 2-year interim period to soften the blow of leaving the EU.
Although the US economy has been performing well and the labor market remains red-hot, inflation numbers remain soft. There was some disappointment in the markets as September CPI and Core CPI narrowly missed their estimates. On the release front, CPI gained 0.5%, short of the estimate of 0.6%. Core CPI posted a small gain of 0.1%, shy of the forecast of 0.2%. With inflation an important consideration in future rate decisions by the Federal Reserve, investors will be anxiously monitoring how Fed policymakers respond to September’s soft inflation numbers. Also on Friday, US retail sales data was a mix. Core Retail Sales gained 1.0%, above the estimate of 0.9%. However, retail sales were up 1.6%, short of the forecast of 1.7%.
