- 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|
|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%|
|14.00||EUR||Belgian NBB Business Climate||1.5||1.8|
|21.45||NZD||Retail Sales q/q||1.4%||0.2%|