The Euro kicks off the day marginally weaker, trading just under the 1.14 handle as worries crop up once again around US car tariffs. Yesterday, US Senate Finance Committee Chair Chuck Grassley was on the wires stating that auto tariffs aren’t necessarily the best thing to do, but that President Trump is inclined to implement them in order to get the EU to negotiate. Keeping in mind that the Commerce department in the US has until 17th Feb to publish a report on auto tariffs. For the day ahead we get final readings for CPI figures for December, with headline inflation expected to fall well below the 2% target (at 1.6%).
CPI @ 10:00am.
Sterling has been stable after Prime Minister May’s government survived the no-confidence motion yesterday, (which was largely expected by markets). The PM has stated her intentions now lie with cross party dialogue before addressing Parliament on Monday. Attention will likely also turn toward the EU reaction, who are reportedly discussing an extension to the Brexit deadline. The Bank of England’s Carney was on the wires yesterday, warning of volatility, which we expect to remain elevated as we head into the weekend.
Bank of England Credit Conditions & Bank Liabilities Surveys @ 9:30am.
The Dollar holds firm despite the ongoing Government shutdown in the US (a Trump administration official was on the wires yesterday stating that the partial shutdown would shave 0.1% from GDP each week). Risk sentiment more generally has opened up the day on a sour note, with US prosecutors beginning an investigation into Huawei for a possible theft of trade secrets, although the spillover into risk assets has been modest. For the day ahead it’s light on data – with the Philadelphia Fed outlook released this afternoon likely to show a continued worsening in general conditions.
Philadelphia Fed Business Outlook @ 1:30pm
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16 Jan 2019
Euro crosses traded heavy for most of the day yesterday, with Euro/Dollar briefly touching below the 1.14 level. The ECB’s Draghi was on the wires, stating that the economy was weaker than expected amid global uncertainty, whilst stating that a “significant amount” of stimulus is still necessary. While Draghi stated he doesn’t envision a recession, he outlined the slowdown could potentially last longer than expected. Data this morning continues to uninspire, with European 2018 car sales showing their first drop in five years. For the day ahead, the ECB’s Nowotny is due to speak, while trade balance data is released this morning.
Trade Balance @ 10:00am
Sterling rallied yesterday evening after PM May’s Withdrawal Bill suffered a huge defeat in Parliament (at a margin of 230 votes). In response, the PM invited the opposition to table a vote of no-confidence in the government – which will be held later this evening (expected around 7pm). Should the Government win the vote today (as is expected), and with the deal now firmly rejected by Parliament, the risks of some form of extension to Article 50 or a ‘soft Brexit’ outcome have increased. As such, the PM has stated that cross party co-operation in deciding the next steps will take place, whilst reiterating her plan remains to deliver Brexit.
CPI, PPI @ 9:30am
The Dollar strengthened across the board yesterday despite weaker than expected Empire Manufacturing data (which has seen a notable deterioration in recent months, indicative of a continued factory slowdown in the US). Meanwhile, the Fed’s George (a voter this year) was on the wires yesterday also echoing comments from various Fed members in recent weeks, stating a pause in normalisation would give the Fed time to assess if economic growth is sustainable. For the day ahead retail sales data is not expected to be released due to the ongoing government shutdown, while the Fed are set to release their Beige book this evening.
Federal Reserve Releases Beige Book @ 7:00pm
15 Jan 2019
Big day for the U.K.
The Euro is broadly consolidating ahead of the Meaningful vote in the UK later this evening, which could have a notable effect on the Euro alongside GBP. This morning, reports did the rounds that Germany’s Merkel had outlined a potential for concessions to be made to the UK should MPs vote down the Withdrawal Agreement, but this has since been denied. For the day ahead, aside from UK politics, eyes will turn toward Mario Draghi’s addressing European Parliament (around 3pm), while trade balance data is released at 10am.
Trade Balance @ 10:00am
Sterling has been outperforming its G10 peers with Euro/Sterling hovering around the 89p level, as all eyes hone in on UK Parliament later this evening. Yesterday saw a number of debates in the Commons and at this stage, a government victory later this evening would come as a large surprise for market, despite PM May attempting to rally MPs behind her deal or risk “letting the British people down”. The Brexit debate is scheduled to begin at 7:00pm this evening, with the meaningful vote expected to take place sometime around 8-9pm.
No data of note today
The Dollar is treading water as we walk in this morning, as the Government shutdown in the US continues (now on its 24th day). Yesterday the Fed’s Clarida reiterated the Fed has room to be patient with tightening monetary policy, with Fed speak remaining in focus for the day ahead (the Fed’s George, Kashkari and Kaplan are all due on the wires this evening). On the data front, US Empire manufacturing figures will be watched due to its recent sharp fall, while US PPI is expected to decline on the back of the sharp decline in energy prices.
Empire Manufacturing, PPI @ 1:30pm.
11 Jan 2019
Sterling Flash Update
- Sterling moving higher as reports hit the wires that Brexit may be delayed past the March 29 deadline.
Euro/Sterling trading back below 90p, with support at 0.8950, while Cable eyes up resistance at the 100-day moving average at 1.2893.
The Euro continues to consolidate above 1.15 vs. the Dollar, with a light data calendar for the day ahead. The release of ECB minutes yesterday highlighted the Central Bank is closely monitoring the data, citing that the risks are “moving to the downside”. However, the ECB’s Villeroy was on the wires, stating that the current slowdown should not be confused with a downturn – although the ECB should not rush into policy normalisation too early. It’s light in terms of drivers for the day ahead, with EU/US negotiations ongoing: Trade Commissioner Malmstrom stated yesterday that the EU have been discussing Soybeans and natural gas with the US.
Data: No data of note today.
Sterling continues to trade on the weaker side as uncertainty ramps up ahead of the Meaningful Vote next week. Despite the UK Parliament voting to take more control over the Brexit process, Sterling is underperforming as the deal looks increasingly unlikely to pass first time. Investors are gauging whether a no-confidence motion in the government will be put forward by the Labour party, and the ramifications that will have for Sterling. For the day ahead we get release of industrial production and GDP data in the UK, while politics remains in the driving seat.
Data: Industrial Production, GDP @ 9:30am.
Yesterday saw some consolidation in the Dollar after the move lower seen earlier this week. Vice Chair Clarida yesterday towed the line of the Fed’s more dovish stance, who stated that it was unclear if inflation has moved sustainably back to 2%, while also stating that the Fed won’t hesitate to change the balance sheet runoff if necessary. On the political front, the government shutdown in the US continues, with reports President Trump is preparing the legal groundwork to declare a national emergency in order to build the wall, while the day ahead sees CPI data released (expected to fall to 1.9% from 2.2%).
Data: CPI @ 1:30pm.
9 Jan 2019
The Euro is edging higher toward the top of the 1.13/1.15 range this morning, helped by market optimism around a potential trade deal between the US and China. For the day ahead we get unemployment figures in the Eurozone (expected unchanged at 8.1%), while the EU’s Trade Commissioner Cecilia Malmstrom is due to meet with US trade representative Robert Lighthizer to discuss bilateral trade, so potential for headline risk remains despite the fact that the European Commission announced that imports of US soybeans were likely to rise further (following a 112% increase since July).
Data: Unemployment @ 10:00am.
Yesterday, around 20 Conservative MPs moved against the government in supporting an amendment which restricts the government’s powers in the event of a no-deal Brexit by needing explicit parliamentary approval to raise taxes. With PM May losing her first vote of 2019, she aims to restart her bid to garner support for her Brexit deal today. Sterling looks unlikely to move materially ahead of the Meaningful vote on the Withdrawal Agreement on the 15th, with Euro/Sterling again hovering around the 90p level.
Data: No data of note today.
The Dollar trades on the softer side as the recovery in equities continues, with optimism increasing around the US/China trade negotiations. Yesterday President Trump highlighted that negotiations were going very well, with headlines on the outcome expected later this morning. Domestically, the US Government remains partially shutdown as the President continues to push for border wall funding – Congressional leaders are due to meet again with President Trump today. In terms of releases we get the Fed minutes later this evening, which will likely be consistent with a more cautious and data dependent Fed.
Data: FOMC Minutes @ 7:00pm.