Newsletter – 6th February 2018

Morning Bulletin

Yesterday

  • The UK achieved an unwanted hat-trick yesterday morning with the final Purchasing Managers Index also falling short of expectations. The Final print of the trio was ‘Services PMI’, with the actual reading of 53.0 coming in below the expected 54.1. That print showed the UK Services sector had expanded at its slowest pace in almost 18 months, but it’s important to note it’s still comfortably in expansionary territory above 50.0.
  • Sterling fell aggressively in the aftermath of this data release and continued to slide for the remainder of the day. The Pound was already under pressure as Brexit fears once again begin to mount ahead of this week’s recommencement of EU talks.
  • The Pound closed the day down -0.85% against the US Dollar, hovering around the 1.4000 handle. Losses were slightly more limited against the Euro, closing down just shy of -0.40% at 1.1280.
  • The issue of the customs union was front and centre over the weekend and more stories emanated yesterday morning. The BBC reported Downing Street had insisted the UK would leave the EU customs union after Brexit. Whilst the Sunday Times reported UK PM May would face a coup from Tory Brexiteers should she continue with plans to keep the UK in the customs union post-Brexit.
  • There were also a number of Eurozone releases yesterday morning:
    • Final Services PMI 58.0 (57.6 Exp)
    • Sentix Investor Confidence 31.9 (33.2 Exp)
    • Retail Sales m/m -1.1% as expected
  • Yet another strong economic print out of the US yesterday afternoon, this time in the form of ISM Non-Manufacturing (Services) PMI, with the actual print of 59.9 smashing the expected 56.5.
  • Speaking before the European Parliament yesterday afternoon, ECB President Mario Draghi said that whilst the Eurozone economy was growing significantly above potential, they could not yet declare victory where inflation is concerned. Mr Draghi said the ECB was confident inflation would converge towards their 2% target, but until then they could not claim success.
Overnight

  • Australia Retail Sales m/m -0.5% (-0.2% Exp)
  • Australia Trade Balance -1.36Bn (0.25Bn Exp)
  • The Reserve Bank of Australia opted to keep their benchmark interest rate on hold at 1.50% as expected, with a statement that the ‘low level of interest rates is continuing to support the Australian economy’. The RBA also kept their monetary policy stance unchanged from their previous meeting, which would suggest the next move in rates is more likely higher rather than lower, but any movement would be slow and unlikely to occur in the near-term.
  • The Aussie Dollar did weaken off in FX space following the poor data and RBA meeting, however losses were relatively limited.
Today
  • No key data set for release this morning.
  • This afternoon the respective Trade Balances of Canada and the US will be in focus at 1.30pm.
  • Brexit talks are due to recommence between the UK and the EU today, with a transitional arrangement the next item on the agenda.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1253 -0.28
GBP/USD 1.3978 +0.15
EUR/USD 1.2419 +0.42
AUD/USD 0.7884 +0.09

 

Time (GMT) Region Data Release Forecast Previous
09.00 EUR German Buba Pres Weidmann Speaks
09.10 EUR Retail PMI 53.0
13.30 CAD Trade Balance -2.3Bn -2.5Bn
13.30 USD Trade Balance -52.1Bn -50.5Bn
15.00 CAD IVEY PMI 60.7 60.4
15.00 USD JOLTS Job Openings 5.95M 5.88M
TBC NZD GDT Price Index 4.9%
21.45 NZD Employment Change q/q 0.4% 2.2%
21.45 NZD Unemployment Rate 4.7% 4.6%