Risk Appetite Ebbs Away

Growing geopolitical risks spur gains in the Swiss franc and weakness in the antipodeans ahead of today's busy data calendar

Previous Day's Market Highlights

Markets struck a risk averse tone on Thursday, with increasing global geopolitical risk helping the Swiss franc to gain in addition to causing weakness in the antipodean currencies. The Swissie gained around 0.5%, despite a softening in GDP growth and the monthly economic barometer falling for a 5th consecutive month, as investors bought the franc to shelter from increasing risks including the abrupt end to the US-North Korea summit and increasing tensions between India and Pakistan. In addition, riskier currencies weakened, with both the Aussie and Kiwi dollars trading lower by around 0.5%. 
Elsewhere, the US dollar gained around 0.2% after GDP figures for the final quarter of last year beat expectations. Growth was recorded at 2.6% on an annualised, quarter-on-quarter basis, well above expectations of around 2%. The GDP figure, and in turn the dollar, was boosted by an increase in business investment, a point that bodes well for future growth. In Europe, the pound lost 0.35% over the course of the day as investors took profit after this week’s rally. Meanwhile, the single currency was little changed, with little in the way of market-moving economic data released.
In other markets, most European equity markets gained by around 0.4%, though the UK’s FTSE100 lagged behind the pack. Across the pond, US markets lost ground, with the benchmark S&P 500 falling by 0.3% as concerns relating to US-China trade tensions weighed on prices. Finally, oil prices gained by 1%, with OPEC-led supply cuts continuing to underpin prices. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1657 1.1724 1.1312 3.51%
GBP/USD 1.3256 1.3350 1.2773 4.32%
EUR/USD 1.1372 1.1489 1.1233 2.23%
GBP/AUD 1.8685 1.8725 1.7844 4.70%
GBP/NZD 1.9445 1.9542 1.8701 4.30%
GBP/CAD 1.7415 1.7551 1.6960 3.37%

Today's Market Highlights

The week concludes with a busy economic calendar, with most attention likely to focus on the monthly manufacturing PMI surveys from the eurozone, UK and US. Expectations are for the eurozone to remain in contractionary territory, while the UK figure is expected to fall further to 52.0 as the impact of pre-Brexit stockpiling diminishes. The manufacturing sector is also set to have slowed in the US, with expectations for this afternoon’s PMI figure to show a level of 55.5. 
Also in focus today will be inflation data from the eurozone and the US. This morning’s eurozone CPI release is expected to show core inflation remaining steady at 1.1%, with a slight uptick in headline CPI to 1.5% anticipated. The lack of inflationary pressures in the bloc is unlikely to give the ECB any reason to bring forward their plans for tightening monetary policy. From the US, market participants will pay keen attention to the core PCE index - the Fed’s preferred inflation gauge. Expectations are for inflation to remain broadly in line with the Fed’s 2% target. The afternoon session also sees GDP released from Canada, along with a speech from Fed member Bostic. 
Looking ahead to next week, calendar highlights include the monthly Canadian and US labour market reports as well as services PMI figures from the eurozone, UK and US. Finally, central bank meetings will also be in focus, with the Reserve Bank of Australia (RBA), Bank of Canada (BoC) and European Central Bank (ECB) all releasing their latest policy decisions. Though no change to monetary policy is expected from any of the banks, the ECB’s latest economic projections will attract significant attention as the eurozone economy continues to slow.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:00 EUR Final Manufacturing PMI 49.2 49.2
09:30 GBP Manufacturing PMI 52.0 52.8
10:00 EUR CPI (y/y) 1.5% 1.4%
10:00 EUR Core CPI (y/y) 1.1% 1.1%
13:30 USD Core PCE Index (y/y) 1.9% 1.9%
13:30 CAD GDP (y/y - Dec) 1.4% 1.7%
15:00 USD ISM Manufacturing PMI 55.5 56.5