UK economy shrinks, but data better than forecast
Let's start with the first of the two main events this week and over in the US it was a significant release. Inflation for October was softer than expected and has seen a sharp slowdown versus September (7.7% v 8.2%). We have seen many false dawns before, however economists believe this is the real deal. If November sees a drop further, the Fed will undoubtedly have to slow interest rate hiking.
The stock market soared on the back of the news, with Apple Inc setting a stock record for a daily increase (worth checking out that number yourself). £-$ rates went through the roof too (3%) and we believe the pair hit its largest one-day advance on record. In fact, yesterday was the worst day for the Dollar in over 10-years. It marks the beginning of the end for high inflation over in the US, but a rapid decline is not expected, so surges like this are unlikely to materialise again.
£-€ rates did see a bump in price after a sell-off on Wednesday, but has lost some ground today after the UK GDP data this morning. September's reading was worse than expected (-0.6% v -0.4%), but the Q3 result was better (-0.2% v -0.5%). There is a chance the UK may avoid recession this winter, which isn't being factored into the Pounds current value (something to be aware of).
The other data from the UK today was mostly positive. Manufacturing, industrial production and construction output all beat forecasts. Whilst the trade balance deficit was a much healthier looking -£15.6BN as opposed to -£18.7BN. Next week is all about the Autumn budget statement, where we will learn just how tight fiscal policy is going to be.