Newsletter – 5th February 2018

Morning Bulletin

Friday

  • UK Construction PMI kicked-off the data releases Friday morning but dissapointed with the actual print of 50.2 falling well short of the 52.0 expected in January. This was the lowest print in 4-months and was just about in expansionary territory (Above 50.0).
  • This weak print put Sterling on the back-foot Friday morning and it never recovered, eventually closing the day down -0.53% against the Euro at 1.1346, and down -0.90% against the US Dollar at 1.4132.
  • Elsewhere Friday morning there were two weaker than expected European prints:
    • Eurozone PPI m/m 0.2% (0.3% Exp)
    • Italian Prelim CPI m/m 0.2% (0.3% Exp)
  • Spanish PM Rajoy has said he sees GDP growth of at least+2.5% in 2018; that is up from a previous forecast of +2.3%.
  • There were some conflicting messages out of Germany Friday, with Chancellor Merkel suggesting there was still a lot of work to do on coalition talks, with some serious differences between the parties on a number of issues. In contrast her counterpart and SPD Leader Martin Schulz said he assumed the next few days of talks would be successful for the country.
  • Friday afternoon was of course dominated by US Jobs data and the numbers were very encouraging, with earnings up, an increase in the number of people employed and the overall unemployment rate holding steady at a 17-year low:
    • Average Hourly Earnings m/m 0.3% (0.2% Exp)
    • Non-Farm Employment Change 200,000 (181,000 Exp)
    • Unemployment Rate 4.1% as expected
  • This data underpinned a solid day’s trading for the US Dollar, something which has been rare of late. One of the biggest moves, aside from against the Pound, saw the US Dollar gain some +1.24% against the Aussie Dollar.
Over The Weekend & This Morning

  • Speaking on the Andrew Marr Show, UK interior Minister Amber Rudd said the UK Government would not surrender in their fight to win a bespoke trade deal with the European Union. This ahead of the recommencement of Brexit talks tomorrow.
  • Australia MI Inflation Gauge m/m 0.3% (0.1% Previous)
  • China Caixin Services PMI 54.7 (53.6 Exp)
  • Eurozone Final Services PMI 58.0 (57.6 Exp)
  • Speaking Friday evening, US Fed Member Williams pointed to a pick up in wage growth and inflation as signs of a healthy economy, but said neither at this point are enough to justify the Fed hiking rates more than 3-4 times this year.
Today
  • UK Services PMI is the key print this morning due at 9.30am.
  • This afternoon US ISM Non-Manufacturing PMI is the key print at 3pm, followed an hour later by the ECB’s President Mario Draghi who will be testifying before the European Parliament.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1340 +0.05
GBP/USD 1.4142 +0.16
EUR/USD 1.2469 +0.11
AUD/USD 0.7946 +0.33

 

Time (GMT) Region Data Release Forecast Previous
09.30 EUR Sentix Investor Confidence 33.2 32.9
09.30 GBP Services PMI 54.1 54.2
10.00 EUR Retail Sales m/m -1.1% 1.5%
14.45 USD Final Services PMI 53.3 53.3
15.00 USD ISM Non-Manufacturing PMI 56.5 55.9
16.00 EUR ECB President Draghi Speaks