After the pound’s anti-climactic response to the Bank of England’s slight rise in interest rates last week, it is mostly keeping its head above somewhat choppy waters

1. Euro Weekly market report
After the pound’s anti-climactic response to the Bank of England’s slight rise in interest rates last week, it is mostly
keeping its head above somewhat choppy waters. The second cabinet reshuffle in as many weeks may have left a
question mark over the stability of Theresa May’s government, but investors have been more focused on the positive
signs indicating a measure of progress in the Brexit talks this week. These hopes have buoyed the pound to at least claw
back some of last week’s losses, but much hangs on the outcome at this point.
The economic statistics this week have done little to boost optimism; the BRC measure of UK retail sales that came early
in the week showed that shopkeepers had their worst October in either five years or nine years, according to which of
the data are used for comparison and an SMMT report demonstrated the seventh consecutive monthly decline in car
sales, falling by -12% in October. The only bright spot was the UK services sector purchasing managers' index - instead
of falling to 53.3, as forecast, it went up to 55.6.
The expectation was that the PMIs from Europe this week would fall as forecast but the numbers didn’t quite bear this
out. The -1.6% monthly fall in German industrial output was twice as negative as analysts had forecast, dragging annual
production growth down from 4.6% to 3.6%. Investors' initial reaction was to mark down the euro on the news but by
mid-morning the move had begun to reverse. However, retail sales in Italy and pan-Euroland came in ahead of forecast.
Mario Draghi’s speech this week contained more of the same, leaving the euro somewhat in limbo, although still
maintaining a relative strong position.
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