Who To Trust: The Honeybees, Or The IMF?

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Honeybees can accurately forecast rain. When they know rain is coming, they work harder to compensate for the rainy periods - during which they can't fly to gather pollen.

The IMF have done similar attempt and warned this week in their bi-annual global financial stability report about higher risks to the word's financial system this year. They are concerned about high debt levels of debt and unrealistically high assets as shown by the stock market indices - many of which have hit all time highs. It's such a shame then that the IMF's record of predicting recessions - especially the last global recession - is nowhere near as good as the honeybees'!

Talking of predictions, week ahead brings some event-specific-risk for both Sterling and the Euro as a result of the EU Leaders’ Brexit Summit; which could significantly shift the currency pair out of its 1.1363-1.1494 range.

We have a crowded data release calendar next week. For the UK, Quarterly Employment Statistics for the period up to August will be due. Analysts expect just 20,000 new jobs to have been filled. Such weak growth may be due to fewer available workers since the actual job vacancies is at a record high. The relatively unchanged size of the UK labour force means the unemployment rate is likely to be flat at 4.0% - compared to last quarter. Earnings growth is expected be unchanged at 2.9% for the same period.

September Inflation is forecast to have fallen slightly to 2.6%, from 2.7% in August. Finally, Retail Sales figures for September are also due. After strong growth in that sector in thelast few months - which has been helped by along hot summer; analysts expect a 0.2% in September, but annual growth expectations remain positive.

in the US, Retail Sales for September are the main release across the pond. A high level of consumer confidence, buoyed by the on-going strength of the labour market, as well as the timing of the Labour Day weekend is expected to result in a boost in sales of 0.6% in month-on-month terms.

Finally, in Asia, Chinese GDP for the third Quarter of the year, is likely to give indications of the extent to which recent escalation in trade tensions with the US have had any effect. The forecast is for growth to have slowed down slightly to 6.6%, compared to 6.7% last quarter.

Oh, and if our headline this week was a question, our answer would be: "It depends . . . !"

See you next week!

To discuss how the above may affect you, please contact your Currency Dealer at Heritage Pay on +44 (0) 203 858 7274.

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