Previous Day's Market Highlights
Sterling remained under pressure on Monday, losing around 0.5% against the dollar and 0.3% against the euro, as GDP data showed the economy contracted by 0.4% in December – the biggest monthly fall since 2016. In addition, annual growth for 2018 was measured at only 1.4%, the lowest level since 2012, with Brexit-related uncertainty continuing to weigh on business investment, which has now fallen for four consecutive quarters. The bleak GDP report, combined with the increasing risk of a no-deal exit from the European union and no sign of a resolution to the UK-EU impasse on the cards, conspired together to drive sterling to its lowest level against the greenback in over 3 weeks, with cable now having recorded a daily decline on all-bar-one trading day this month.
Elsewhere, major economic data was lacking however the dollar recorded significant gains, with the dollar index chalking up its eighth consecutive day of gains to reach its highest level this year. Furthermore, the euro fell to its lowest level against the dollar since December 14th, below the key $1.13 level while the dollar rose to its highest levels against the yen this year. The dollar strength came as geopolitical risk increased ahead of the expiry of the US-China trade truce on March 1st with the dollar also being underpinned by an increase in yields across the curve, with 10-year treasury yields increasing by almost 2bps.
In other markets, European equities gained approximately 1% with trade-sensitive stocks the major winners, albeit on thinner-than-usual trading volumes while US markets closed flat. Finally, oil prices cooled off with both Brent and WTI losing around 1% as trade concerns continued to weigh on prices and overshadowed the impact of OPEC-led supply cuts.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today’s economic calendar is sparsely populated with little in the way of tier 1 economic data. The most significant data release looks set to be US JOLTS job openings, expected to hold steady at 6.9 million, though the data is for December hence is likely to have little in the way of market impact. Instead, the primary market drivers look set to be Brexit, with the Prime Minister set to deliver a statement to Parliament this afternoon to update MPs on the Brexit negotiations, as well as the ongoing US-China trade negotiations ahead of the March 1st truce deadline.
Central bankers also come to the fore today with speeches from Fed Chair Powell and Bank of England Governor Carney both scheduled. The former is likely to be closely watched after the Fed indicating a pause to their tightening cycle at their last policy meeting, with any comments surrounding the pace of further rate hikes as well as the balance sheet run-off likely to command significant market attention. In contrast, Carney is due to discuss the global economic outlook and trade tensions, with any comments regarding the UK’s economy post-Brexit possible sources of volatility for the pound. Furthermore, Fed voter George and Alternate Member Mester along with the ECB's Lautenschläger are also scheduled to speak.
Finally, the Reserve Bank of New Zealand (RBNZ) announce their latest policy decision overnight (1am UK time) with no change to interest rates expected. Markets are currently expecting rates to be kept on hold until the end of 2020, however any downward revisions to economic forecasts as well as cautious comments cannot be ruled out. However, such a dovish shift, opening the door to a rate cut, seems largely priced into markets hence an upside move in the kiwi dollar shouldn’t be discounted.
Today's Economic Calendar
|1:00pm||GBP||BoE Gov. Carney speech|
|3:00pm||USD||JOLTS Job Openings||6.96m||6.89m|
|5:45pm||USD||Fed Chair Powell speech|