Another Donald that speaks his mind8th February 2019
Moving oil prices had a modest effect on the Pound yesterday but, as always, political considerations dominated trading. Donald Tusk set the cat amongst the pigeons less than 24 hours before Theresa May is due to formally request a renegotiation of the Brexit deal, reinforcing fears the deadlock will continue. Rumours seem to confirm that Whitehall is not expecting EU concessions ahead of next week’s scheduled parliamentary debate, which increased speculation the vote would be delayed.
The Pound managed a modest gain against a weak Euro but failed to sustain moves above 1.2950 on the Dollar. The markets are set to monitor the rhetoric during Theresa May’s visit to Brussels. Today’s Bank of England MPC meeting is highly unlikely to produce any changes to interest rates. The forward guidance and forecasts will still be an important factor for Sterling sentiment especially as the market expects that growth forecasts will be reduced. Sterling has already tested the 1.2900 mark on the Dollar but is little changed against the Euro, around 1.1375.
The overall US trade deficit narrowed to $49.3bn for November from a revised $55.3bn the previous month as imports dipped. The data was delayed by the government shutdown but will provide a slight boost to fourth-quarter GDP estimates. The Dollar maintained a firm overall tone and advanced against commodity currencies.
Federal Reserve (Fed) Chair Powell stated that the US economy was in a good place, but there were no specific comments on the monetary policy outlook and the market reaction was limited. Fed Governor Quarles also steered clear of direct policy comments, although he stated that his main focus was on the direction of global growth.
German industrial orders declined yet again, meaning the annual percentage decline in orders was 7%. Italian growth forecasts are expected to be downgraded by the EU and GDP growth is expected to be below 1% for 2019 and 2020, maintaining concerns over growth in the area.
As a result of this slowdown, it looks like the rate hike will be postponed by the European Central Bank (ECB), which kept the downward pressure on the Euro. Versus the Dollar, the single currency fell below the 1.1400 level, not helped by a continuing Dollar rally.
Today is a busier day data-wise, with numbers expected from France, Spain, Switzerland and Italy and the EU’s economic bulletin will grab some attention. However, the main news is the Bank of England’s (BoE) interest rate decision.
Data to watch:
09:00 EUR Economic Bulletin
10:00 GBP May – Juncker meeting
10:00 EUR European Commission Releases Economic Growth Forecasts
12:00 GBP BoE Asset Purchase Facility
12:00 GBP BoE Interest Rate Decision
12:00 GBP Bank of England Quarterly Inflation Report
12:00 GBP BoE MPC Vote Unchanged
12:00 GBP BoE MPC Vote Cut
12:00 GBP BoE MPC Vote Hike
12:00 GBP Bank of England Minutes (Sep 2)
12:15 EUR ECB’s Mersch speech
12:30 GBP BoE’s Governor Carney speech
13:30 USD Initial Jobless Claims (Feb 1)
14:30 USD Fed’s Clarida speech
23:30 JPY Overall Household Spending (YoY) (Dec)
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