Cable seems weaker amid Fed and BoE policy divergence, harmonized U.S. and U.K. data

Data releases in the UK were scarce this week with only a very strong retail sales report on the calendar.

The monetary policy divergence between the Fed and the BoE could come back into play following the strong US PMI this week, the near-term volatility notwithstanding.

U.S. highlights:

In U.S. housing indicators usually hints on continued gains; manufacturing surveys mixed after rise in October PMI.

Declining trend in initial jobless claims suggests recent payroll employment results overstate weakness.

U.K. highlights:

Carney highlights the overall benefits of the UK's EU membership while mediating in the Brexit debate.

Retail sales surge offers further signs that domestic demand is holding firm.

Despite the weak PMI, other output surveys still look solid and indicate a gradual slowing in growth.

The dollar index is up on the week and has now recouped half its post-payroll losses, though speaking about the dollar these days somewhat misses the point, idiosyncratic factors have driven cross market correlations to such low levels.

Derivatives Strategy:

Stay short cable through GBP/USD put spread, hold 2m GBP/USD 1.50-1.46 put debit spread. With the put spread worth only 19bp we continue to see value in holding on to this trade.