Newsletter – 12th May 2017

Morning Bulletin

Yesterday

  • Yesterday’s trading was largely dominated by the UK with the release of UK Manufacturing Production kicking off proceedings in the morning, followed by the week’s main event, the Bank of England’s ‘Super Thursday’ at midday.
  • As far as Sterling was concerned both disappointed, with the Pound closing the day down around 0.4% against both the US Dollar (1.2888) and Euro (1.1855). In the wake of the BOE these rates did however trade as low as 1.2849 and 1.1829 respectively before recovering somewhat.
  • UK Manufacturing Production was much worse than forecast for the month of March with a print of -0.6% against the expected decline of -0.2%. Furthermore the UK’s Goods Trade Balance deficit widened to £13.44Billion from a previous £11.40Billion.
  • The main event yesterday was of course the Bank of England’s rate decision, accompanying statement and inflation report, the key points that emerged:
    • BOE left rates on hold at 0.25% as expected in a 7-1vote.
    • Overshoot of Inflation was purely due to Sterling exchange rate depreciation.
    • If the economy followed path consistent with May’s central projection then monetary policy could require greater tightening over the forecast period than the gentle rising path implied by market yield curve.
    • 2017 GDP Estimate revised down to +1.9%(+2.0% Previous); 2018 +1.7%(+1.6% previous).
    • 2017 CPI Estimate revised up to +2.8%(+2.7% Previous); 2018 +2.4%(+2.6% Previous).
    • Gov Carney acknowledged people will feel the squeeze as wage growth won’t keep up with increasing goods and services they consumer.
    • Perhaps in a nod to the upcoming elections and subsequent Brexit negotiations the BOE suggested a ‘smooth’ Brexit process could lead to a rise in interest rates toward more normal levels over the next 3 years.
  • Other data releases of note yesterday afternoon:
    • UK NIESR GDP Estimate came in at 0.2% for month of April.
    • Canadian NHPI (House Price) m/m 0.2% as expected.
    • US PPI m/m 0.5% (0.2% Exp).
    • US Unemployment Claims 236K (245K Exp).
Overnight

  • According to a report issued by credit ratings agency Moody’s the US economy has returned to full employment for the first time in a decade.
  • Despite months of President Trump attacking the Chinese, overnight the White House has announced that a broad new trade deal has been struck between the US and China which will improve access to the Chinese market for American beef producers, electronic-payments providers and natural-gas exporters to name just a few.
  • New Zealand Business Manufacturing Index 56.8 (57.8 Previously).
  • German Prelim GDP q/q 0.6% (0.6% Exp)
  • German Final CPI m/m 0.0% (0.0% Exp)
Today

  • Quiet morning in prospect following some lower key European data already released.
  • The afternoon will be dominated by data releases out of the US with CPI and Retail Sales headlining at 1.30pm.
Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1850 -0.11
GBP/USD 1.2874 -0.10
EUR/USD 1.0863 +0.03
AUD/USD 0.7375 -0.05

 

Time (GMT) Region Data Release Forecast Previous
10.00 EUR Eurozone Industrial Production m/m 0.3% -0.3%
13.30 USD CPI m/m 0.3% -0.3%
13.30 USD Retail Sales m/m 0.6% -0.2%
14.00 USD FOMC Member Evans Speaks
15.00 USD Prelim UoM Consumer Sentiment 97.0 97.0
15.00 USD Business Inventories m/m 0.1% 0.3%
17.30 USD FOMC Member Harker Speaks