Previous Day's Market Highlights
Sterling held steady on Wednesday despite CPI inflation data falling to its lowest level in 2 years with prices increasing at just 1.8% in January on a year-over-year basis. The main cause of the fall in inflation was a decrease in energy prices, with real wages now set to increase by over 1.5% on a yearly basis. While such an inflation reading would usually be negative for the pound and increase the chances of a continuation of expansionary monetary policy measures, sentiment around sterling is still dependent on the Brexit negotiations and the ongoing UK-EU stalemate hence the limited volatility after the data was released. In the US, CPI inflation also fell in January on a year-on-year basis, though prices held steady when measured on a month-on-month basis between December and January. Despite core CPI remaining above the Fed’s target level, there was nothing in today’s inflation report likely to move the Fed away from its patient stance hence the dollar edged modestly lower, by around 0.2%, but still held near its highest levels of the year against a basket of peers.
The single currency was the biggest loser over the course of the day, trading lower by around 0.3% against both the pound and the dollar after industrial production figures missed expectations. Production in December fell by 0.9% on a month-over-month basis and by 4.2% on a year-over-year basis to record a second consecutive month of declines. Such poor data will not help to reassure investors’ concerns that an economic slowdown is on the horizon, with today’s GDP release set to be closely watched for further signs of a softening in economic activity. Overnight, GDP figures from Japan showed growth of 0.3% on a quarter-on-quarter basis, bouncing back from contraction in the third quarter of last year.
In other markets, European equity markets closed in the green, with the UK’s FTSE100 leading the way adding around 0.8%. Meanwhile, US markets recorded gains, with the S&P 500 adding 0.3% on continued optimism surrounding US-China trade talks. Finally, oil prices rallied, continuing their gains from the previous session, with both Brent and WTI adding just over 1% despite US crude stockpiles reaching their highest levels since November 2017.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Concerns over a global economic slowdown are likely to come back to the fore today, with GDP data from the eurozone for the final quarter of last year set to be the main focus for investors. After German GDP this morning showed Europe’s largest economy barely avoiding a recession, with the economy stagnating in the final quarter of 2018, expectations are low for the bloc’s overall figure. Conesus among market participants is for growth of only 0.2% on a quarter-on-quarter basis and just 1.2% on a year-on-year basis. If expectations are correct these would be the joint-lowest YoY figures since 2015 with such a result likely increasing fears over a synchronised downturn in global economic activity.
Elsewhere, in the UK, PM May is due to present a ‘neutral’ motion to Parliament allowing MPs to voice their opinion on their preferred next steps in the Brexit process. While a vote on MPs amendments is set to be held later this evening, any significant amendments to the PM’s plan are likely to be held back until a further vote at the end of the month, allowing Mrs May more time to negotiate with the EU. Sterling is set to remain vulnerable to Brexit-related headlines, especially as the March 29th deadline nears.
Across the pond, the US are set to release a significant amount of data in the afternoon session including retail sales for December, producer price inflation and weekly initial jobless claims. The retail sales figure will provide market participants with a clearer picture of both consumer sentiment as well as the health of the US retail sector over the crucial Christmas trading period. Meanwhile, the PPI figure and initial jobless claims are unlikely to have a significant market impact unless either varies significantly from market expectations.
Finally, a couple of central bank speakers are scheduled with markets due to hear from both the Bank of England’s Vlieghe and the Reserve Bank of Australia’s Kent.
Today's Economic Calendar
|10:00am||EUR||GDP - Q4 18 (q/q)||0.2%||0.2%|
|10:00am||EUR||GDP - Q4 18 (y/y)||1.2%||1.2%|
|1:30pm||USD||Core Retail Sales (m/m)||0.1%||0.2%|
|1:30pm||USD||Retail Sales (m/m)||0.2%||0.2%|
|1:30pm||USD||Initial Jobless Claims||225k||234k|