Newsletter – 22nd February 2018

Morning Bulletin


  • Yesterday morning’s key UK data was largely in-line with expectations:
    • The Average Earnings Index was 2.5% as expected.
    • Government borrowing actually ran a surplus of11.6Bn. That borrowing figure led to the ONS suggesting UK borrowing for the year to date is at its lowest level since the Financial crisis in 2008.
    • The number of people claiming Unemployment related benefits (Claimant Count Change) was down7,200 during January. A rise of 2,300 had been forecast.
    • Despite the fall in benefits claims, the overall Unemployment rate unexpectedly rose to 4.4% from a prior 4.3%. That was in fact the first increase in the rate since June 2015.
  • Whilst the UK data was largely solid the Pound did decline a fraction in FX space.
  • Sterling did bounce back in the afternoon following comments from a number of Bank of England members who were testifying before the Treasury Select Committee on inflation and the economic outlook.
    • Chief Economist Andy Haldane said he thought there was a chance interest rates would need to rise faster than the central bank’s central view in order to bring inflation to target.
    • Governor Mark Carney suggested the financial markets predictions of a 50% chance of a rate hike in May were now moving appropriately in line with the underlying economic data.
  • Some of yesterday’s other key data included:
    • Eurozone Flash Manufacturing PMI 58.5 (59.2 Exp)
    • Eurozone Flash Services PMI 56.7 (57.7 Exp)
    • US Existing Home Sales 5.38M (5.61M Exp)

  • French Final CPI m/m -0.1% as expected.
  • According to the Telegraph, the Cabinet did not agree to PM May’s strategy for the Brexit transition period.
  • Minutes from the US Federal Reserve’s January meeting were released last night and they revealed that Fed officials saw increased economic growth and a rise in inflation as justification to continue raising interest rates gradually. The majority of Fed members saw the near-term outlook as modestly stronger, with risk to the upside coming from tax cuts and strong growth increasing the likelihood of further rate hikes.
  • The US Dollar rallied following the minutes, with GBP/USD falling to a 1.3900 handle and EUR/USD breaking back down below the 1.2300 level.
  • Busy data calendar today. This morning UK GDP is our key print at 9.30am.
  • Into the afternoon and the minutes from the ECB’s latest monetary policy meeting will be closely scrutinized when released at 12.30pm.


Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1319 -0.10
GBP/USD 1.3894 -0.16
EUR/USD 1.2273 -0.08
AUD/USD 0.7806 +0.03


Time (GMT) Region Data Release Forecast Previous
09.00 EUR German IFO Business Climate 117.1 117.6
09.30 GBP Second Estimate GDP q/q 0.5% 0.5%
09.30 GBP Prelim Business Investment q/q 0.5% 0.5%
11.00 GBP CBI Realised Sales 13 12
12.30 EUR ECB Monthly Meeting Minutes
13.30 CAD Core Retail Sales m/m 0.1% 1.6%
13.30 USD Unemployment Claims 230K 230K
14.00 EUR Belgian NBB Business Climate 1.5 1.8
21.45 NZD Retail Sales q/q 1.4% 0.2%