Fundamental Summary

PPI Full Report
Input producer prices increased by 7.2% in the year to September 2016, compared with a 7.8% increase in the year to August 2016, the third consecutive month of positive input price inflation. The recent return to positive producer price inflation can be partly attributed to the changes in the sterling exchange rate, with the effective sterling exchange rate depreciating by 14.4% in the year to September 2016. All else equal, a depreciation of sterling increases the prices of UK imports, with a corresponding impact on the prices paid by producers for imports. If these producers raise their prices in turn, then movements in the exchange rate can influence output producer prices. Oil prices are also likely to have been a factor in the upward trend in input producer price inflation. The stabilisation and recent recovery of the oil price over the last year means that the downwards contribution of crude oil to the PPI inflation series has waned in recent months. This can be seen in Figure 1 as the negative contribution of crude oil to input producer price inflation began to ease off from August 2015 onwards, contributing to the gradual rise of the input PPI inflation rate. This contribution turned positive in the year to August 2016, and has continued into September 2016, with crude oil contributing 1.9 percentage points to the 7.2% increase in input producer prices. This could also explain the positive contribution from refined petroleum products to output producer price inflation in the year to September 2016.

CPI Full Report
The rate of inflation as measured by the Consumer Prices Index (CPI) increased 1.0% in the year to September 2016, compared to a 0.6% increase in the previous month. This is the highest rate since November 2014. However, CPI inflation remains low compared with its long-term performance. The CPI data for September 2016 is the third month to include information gathered since the UK’s referendum on its membership of the European Union, and the changes in the sterling exchange rate which followed. In September 2016, the largest contribution to consumer price inflation continued to come from goods in the lowest import intensity category (0 to 10%). This group of products and services still dominates the slight upward contribution seen for the most import intensive goods and services (40% +), and the contributions for each category increased by comparable amounts in September. Energy has seen a fall in its negative contribution to the CPI in September 2016. This can mainly be attributed to price falls between August and September last year, although it is possible that it could be influenced by the stabilising of commodity prices being offset by the depreciation of sterling.

Employment Rate Full Report
The employment rate in the UK continues to run at a record high of 74.5%, and the unemployment rate holds firm at 4.9%, down over 850,000 since 2010. The rise in employment continues to be driven by full-time work. Average wages including bonuses grew by 2.3% over the last year. Claimant count also nearly reached the 1975 low of 2.3%.

Retail Sales Full Report
In September 2016, the quantity bought (volume) of retail sales is estimated to have increased by 4.1% compared with September 2015; all store types except textile, clothing and footwear stores showed growth with the largest contribution coming from non-store retailing. There was no change in the quantity bought compared with August 2016; decreases in food stores, other stores and textile, clothing and footwear stores were offset by increases in department stores, household goods stores and non-store retailers. The underlying pattern in the retail sector continues to show relatively strong growth with the 3 month on 3 month movement in the quantity bought increasing by 1.8%. Average store prices (including petrol stations) fell by 1.1% in September 2016 compared with September 2015; there were falls in average store price across all store types, except textile, clothing and footwear stores and petrol stations. This is the smallest decrease since August 2014. The amount spent (value) in the retail industry increased by 2.9% compared with September 2015 and increased by 0.1% compared with August 2016. The amount spent online increased by 22.0% compared with September 2015 and by 2.8% compared with August 2016.

British banks preparing to leave UK over Brexit – Observer Reuters BBA The Guardian
Britain’s biggest banks are preparing to move out of the country in early 2017 because of fears over the impending Brexit negotiations, while smaller banks are making plans to leave before Christmas, the chief executive of the British Bankers’ Association Anthony Browne said.

Theresa May’s comments at EU Summit
Watch her speech here

Commitment of Traders Report
The COT report released on Friday indicates no change to long positions, a slight decrease in short positions, a decrease in the weekly close price (as of last Tuesday) and a slight uptick in net non-commercial positions

Upcoming Tier 2 and 3 Data
Monday: CBI Industrial Trends Orders
Wednesday: BBA Mortgage Approvals
Thursday: GDP

GBPUSD Daily

Price remains in the range as highlighted in the chart above.

GBPUSD H4

At the start of the week price moved up from WM2, marking the bottom of the range, to WM3, marking the top of the range.

GBPJPY Daily

Price remains in the range as highlighted in the chart above.

GBPJPY H4

At the start of the week price moved up from the bottom of the range to WM3, marking the top of the range, and then back down to the bottom of the range just above WM2. Price closed just above the WPP.

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