Newsletter – 8th September 2017

Morning Bulletin

Yesterday

  • We saw the euro strengthen against its peers yesterday following the European Central Bank’s press conference which took place after the Eurozone rate announcement.
  • Rates were kept on hold at 0.00% as expected but it was the comments in the press conference by the ECB that caused an already buoyant euro to gain in value against sterling and the US dollar.
  • It was made clear that a decision to taper their quantitative easing programme or delay it will be announced in their October meeting. Growth forecasts were also revised higher.
  • Economists at the Bank downgraded inflation forecasts owing to the recent euro rally that we have witnessed. However, the downgrades were much shallower than expected. (PoundSterlingLive)
  • The ECB also stated that the recent volatility in the euro represents a ‘source of volaility’ which must be monitored accordingly.
  • Euro investors will have been pleased with these updates as the euro closed at it’s highest level for two years against the US dollar. EUR/USD opened at 1.1917 and rallied 9/10 of a percent to close at 1.2022.
  • We have seen GBP/EUR pull back from it’s downward move this past fortnight with the market pushing up from a low of 1.0746 on 29th August to close at 1.0938 on Wednesday despite a feeling that the upward momentum was softening on that day. Yesterday’s press conference in Europe caused the market to drop off by 0.35% and close at 1.0895.
  • GBP/USD rallied yesterday despite sterling posting losses against other major currencies. Cable closed at 1.3103 yesterday after opening at 1.3042 representing a 0.46% gain on the day.
  • We heard from members of the Federal Reserve yesterday. Mester said that further hikes are needed and that the Fed should not wait for inflation to rise. Dudley, however, did not repeat this expectation for a further rate hike this year. The Fed’s George stated that he was not too concerned by recent low US inflation readings.
  • US unemployment claims did not aid the dollar yesterday coming in higher than expected at 298K vs 245K.
  • Canadian building permits m/m were weaker than anticipated at -3.5% vs -1.5% while Ivey PMI also fell short at 56.3 vs 61.3.
Overnight
  • Southern Mexico was last night subject to an earthquake registering magnitude of 8.1. A tsunami warning has been issued for Mexico, Guatemala, El Salvador, Costa Rica, Panama and Honduras and coastal evacuations have been implemented.
  • Final GDP q/q from Japan came in slightly weaker than expected at 0.6% vs 0.7% and trade balance data from China came in weaker at 287B vs 337B.
  • GBP/AUD, GBP/NZD and GBP/JPY are currently trading 1.6245, 1.8021 and 141.60, respectively.
Today
  • GBP/USD is trading higher this morning and has rallied by 1.62% since Monday morning.
  • This morning we have manufacturing production m/m from the UK at 9.30am alongside good trades balance data.
  • All eyes turn to Canada this afternoon with employment change data and the unemployment rate at 1.30pm.
Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.0909 +0.13
GBP/USD 1.3144 +0.34
EUR/USD 1.2046 +0.20
AUD/USD 0.8089 +0.54

 

Time (GMT) Region Data Release Forecast Previous
09:30 GBP Manufacturing Production m/m 0.3% 0.0%
09:30 GBP Goods Trade Balance -11.9B -12.7B
13:30 CAD Employment Change 17.8K 10.9K
13:30 CAD Unemployment Rate 6.3% 6.3%