Are we really performing worse than anyone else?
A data light day on Friday saw Sterling drop 1.65% versus the US Dollar and 1% versus the Euro despite UK GfK Group Consumer Confidence printing better than expected in the small hours.
This was the best reading since August 2015, but consumers’ outlooks are being somewhat tainted by the pessimism in newspapers and the market’s belief that negative rates in Japan would force the Bank of England to delay its rate hike even further. During the New York trading session the day’s losses were halved against the Euro and only 0.5% was gained versus the Dollar. From a technical perspective GBPUSD’s correlation with oil has been increasing since the start of the year, so Dollar buyers beware.
US GDP figures fell more than the markets had pencilled in on Friday lunchtime with Q4 printing at 0.8% against an expected 1.2%. Personal Consumption Expenditures Prices for Q4 also dropped to a measly 0.1% from 2.2% in September. A rebound in non-manufacturing PMI, followed by another solid jobs report on Friday, could provide a welcome lift to risk sentiment and Fed rate expectations.
In the Eurozone, Core Consumer Price Index figures for January showed an annual increase of 0.1%, it’s now at 1%, but Mario Draghi is focussing on the overall figure which came in as expected at 0.4%. Greece is set to review its bailout progress today, with pension reforms high on the agenda. The review comes as bailout monitors arrive in Athens to check on the progress of the reforms promised as part of the country’s €86bn (£65.4bn) bailout package. Creditors want pension cuts as soon as possible, but talks are likely to last for weeks. A poll released on Friday showed that 40% of Germans want Chancellor Angela Merkel to resign over her refugee policy. David Cameron might be more hopeful of achieving a migrant “Handbrake” after hearing this.
Data to watch: 9am Euro Markit Manufacturing PMI. 9.30am UK Markit Manufacturing PMI, Consumer Credit & Mortgage Approvals. 1.30pm US Personal Consumption Expenditures – Price Index (YoY) (Dec) & Core, Personal Income (MoM) (Dec), Personal Spending (Dec) Personal Consumption Expenditures – Price Index (MoM) (Dec), Core Personal Consumption Expenditure – Price Index (YoY) (Dec). 2.45pm Markit Manufacturing PMI (Jan). 3pm ISM Manufacturing PMI (Jan), ISM Prices Paid (Jan), Construction Spending (MoM) (Dec). 4pm ECB’s Mario Draghi speaks. 6pm Fed’s Stanley Fischer speaks.