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China doesn’t like Top Trumps

China doesn’t like Top Trumps

The Bank of England (BoE) kept monetary policy unchanged but the voting pattern of MPC members was more hawkish than expected; two votes to raise rates giving the Pound a short-lived boost. UK retail sales rose 0.8% month-on-month and core retail sales up 0.6% month-on-month in February. The statement, overall, also expressed greater confidence that wage and labour costs would pick up, although there was caution surrounding the risks of global protectionism which would damage growth.

Sterling ranks last on the list of the “anti-risk” currencies, courtesy of Brexit uncertainty and the UK’s current account deficit. Escalating US-China trade tensions and the resulting risk aversion could push the Pound lower against the Dollar, surrendering recent gains.

The BoE’s quarterly bulletin is due at midday and BoE member Vlieghe’s speech begins at 12:30pm; both could have a significant influence on the resurgent Pound.


The US President Donald Trump’s step towards anti-China tariffs yesterday revived fears of a full-blown trade war and prompted some fresh US Dollar weakness, helping GBPUSD to plateau its sharp rise from the highest level since early February.

Trump also signed a proclamation late on Thursday confirming the temporary tariff exemptions for every single major trading partner of the US except for China. The tariff exemptions will now go into effect and will last until May 1st, at which point they will expire, and then the US will decide whether or not to make the exemptions permanent. Temporary exemptions are unlikely to provide much relief, and steel prices are already rising for US producers.

This week the FOMC raised the funds rate to 1.75% and pushed up its GDP forecast to 2.7% for this year (from 2.5%) but the median funds rate projection remained at 2.1%. US yields and the Dollar fell in response, amplified by Chairman Powell’s observation in the press conference that there was ‘no sense’ in the data that the US was on the cusp of an acceleration of inflation. In December, six members were below the end-2018 median projection of 2.125%, but in March there were only two. In short, six members opted for four hikes this year, while six chose three.

With an empty economic docket, the Dollar price dynamics might continue to act as an exclusive driver of the pair’s momentum through the European session. Later in the day, the release of US consumer durable goods orders and Fedspeaks should provide some fresh impetus on the last trading day of the week.


With a host of data yesterday for both the Eurozone and Germany, there was a general disappointment as the majority of readings came in below consensus forecasts. In particular, Eurozone and German Markit PMI and Composite back up the recent sentiment that the Eurozone is showing signs of a slow-down from its surge at the beginning of the year. Similar to the ZEW, German IFO business climate came in slightly below expectations at 114.7 and fell from 115.4 previously.

The Euro was given respite, however, as the Dollar weakened on the back of fears of a trade war, boosting the Euro across the board. Further, German IFO current assessment beat forecasts and the Eurozone current account grew to a surplus of €37.6 bn.

Data to Watch:

12:10 USD FOMC Member Bostic speech
12:30 USD Durable Goods Orders (Feb)
12:30 USD Durable Goods Orders ex Transportation (Feb)
12:30 GBP MPC Member Vlieghe speech
12:30 CAD Retail Sales (MoM) (Jan)
12:30 CAD Retail Sales ex Autos (MoM) (Jan)
12:30 CAD Bank of Canada Consumer Price Index Core (YoY) (Feb)
12:30 CAD Bank of Canada Consumer Price Index Core (MoM) (Feb)
12:30 CAD Consumer Price Index (YoY) (Feb)
12:30 CAD Consumer Price Index – Core (MoM) (Feb)
12:30 CAD Consumer Price Index (MoM) (Feb)
14:00 USD New Home Sales (MoM) (Feb)
14:30 USD FOMC Member Kashkari Speech
17:00 USD Baker Hughes US Oil Rig Count
23:00 USD Federal Reserve Bank of Boston President Rosengren Speech

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