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Hammond’s hopefulness helps Sterling

Hammond’s hopefulness helps Sterling

In the government’s Spring Statement, the UK Chancellor of Exchequer Philip Hammond presented the Office of Budget Responsibility (OBR) 2018 GDP growth forecast. Hammond upwardly revised this marginally higher to 1.5% from 1.4% previously with the 2019 forecast unchanged at 1.3%. Further, inflation’s target is expected to fall back to 2.0% over the next year. That said, within the five-year forecast period, downward adjustments to government borrowing estimates were made, although deficits are still well above the levels set out in the Spring 2017 budget.

On the political front, Chancellor Hammond made remarks that he expects ground to be made on Brexit at next week’s European Council meeting. Sterling made positive moves in response to the statement with a break above 1.3900 against the Dollar. A similar story for the Euro as the pair pushed to just shy of 1.1300 before closing at 1.1276.


The Greenback, in terms of the US Dollar Index, managed to leave lows in the 89.55 band and is now up around 89.70.

Yesterday’s in-line US inflation figures supported the view that the reflation trade could be losing momentum, in turn benefiting stocks and other riskier assets in detriment of the Dollar. In addition, concerns have re-emerged around the trade policy from the Trump administration, particularly after (now ex) Secretary of State Rex Tillerson was fired on Tuesday. President Trump said CIA Director Mike Pompeo is ready to take Tillerson’s place.

Looking ahead, Retail Sales for the month of February will be the salient event in the US docket, seconded by the Department of Energy’s weekly report on US crude oil inventories.


A generally quiet day in the economic calendar yesterday for the Euro but, on the political front, Italian Lega leader Salvini ruled out talks with the Democratic Party for a coalition. The Italian bond market, however, remained resistant to political tensions on the whole, especially with Five-Star parliamentary leader Di Maio announcing that leaving the Euro will be detrimental and was not an option.

The Euro did come under pressure yesterday as the single currency was subject to events in the UK and further lost out to the Dollar as levels briefly surpassed the 1.2400 mark.

Data to Watch:

07:00 EUR Harmonised Index of Consumer Prices (YoY) (Feb)
08:00 EUR ECB President Draghi’s Speech
08:45 EUR ECB’s Praet Speech
10:00 EUR Industrial Production s.a. (MoM) (Jan)
10:45 EUR ECB Vice President Vitor Constancio speech
12:30 USD Retail Sales ex Autos (MoM) (Feb)
12:30 USD Retail Sales (MoM) (Feb)
12:30 USD Retail Sales control group (Feb)
12:30 USD Producer Price Index ex Food & Energy (YoY) (Feb)
16:15 EUR ECB Cœuré Speech

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