Newsletter – 18th April 2018

Morning Bulletin

Yesterday

  • Sterling rates had got off to a flyer yesterday morning. GBP/EUR traded close to an 11-month high of 1.1599, whilst GBP/USD surged to a post-referendum high of 1.4376.
  • Those gains proved short lived however as the Pound stalled and retreated following some mixed UK employment data. Whilst the official Unemployment rate dropped to a record low of 4.2% (4.3% previously), it was the weaker than expected Average Earnings that seemed to weigh on the Pound.
  • Average Earnings were expected to rise by 3.0% in the 3-months to February but the actual print of 2.8% dissapointed somewhat. On the plus side that means for now at least, Earnings have outstripped inflation for the first time in 12-months and the squeeze on UK households could be at an end, albeit it temporarily as we have UK inflation data set for release Wednesday.
  • The German ZEW Economic Sentiment reading declined sharply once again this month, with a print of -8.2. That is far worse than the expected -0.8 and +5.1 recorded last month. The survey which polls around 300 German investors found international trade conflicts and the war in Syria as key reasons for this downturn in optimism.
  • There were a raft of data releases out of North America yesterday afternoon:
    • Canadian Manufacturing Sales m/m 1.9% (1.0% Exp)
    • US Building Permits 1.35M (1.33M Exp)
    • US Capacity Utilization Rate 78.0% (77.9% Exp)
    • US Industrial Production m/m 0.5% (0.3% Exp)
  • The IMF have upgraded Global Growth forecasts to +3.9% from +3.7% for both 2018 and 2019. Despite the upgrades the IMF warned that growth could soften after 2020 as central banks continue their path of tightening monetary policy, China’s gradual slowdown continues and US fiscal stimulus subsides.
  • There was a solid rebound in New Zealand Dairy prices yesterday. The fortnightly GDT price Index showed prices increased by 2.7% since the previous auction.
Overnight

  • Japan Trade Balance 0.12Tn (0.10Tn Exp)
  • According to a Reuters poll of 76 economists, nearly all agreed that the Bank of England would hike rates by 0.25% in May to 0.75%. A small majority also believe the BOE will have increased rates to 1.0% by the end of Q1 2019.
  • Speaking yesterday evening US Fed Member Evans said the Fed could remain patient whilst inflation remains low, hiking rates gradually to avoid any risk of overheating the economy.
Today
  • UK Inflation data headlines at 9.30am this morning, with the CPI print expected to come in at 2.7%.
  • The Bank of Canada will be in focus this afternoon with their rate decision, rate statement and accompanying press conference.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1548 +0.01
GBP/USD 1.4279 -0.04
EUR/USD 1.2364 -0.03
AUD/USD 0.7754 -0.11

 

Time (GMT) Region Data Release Forecast Previous
09.30 GBP CPI y/y 2.7% 2.7%
09.30 GBP PPI Input m/m 0.4% -1.1%
09.30 GBP RPI y/y 3.5% 3.6%
10.00 EUR Final CPI y/y 1.4% 1.4%
15.00 CAD BOC Overnight Rate 1.25% 1.25%
15.00 CAD BOC Rate Statement
16.15 CAD BOC Press Conference
19.00 USD Beige Book
20.15 USD Fed Member Dudley Speaks