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Pound’s purple patch

Pound’s purple patch

GBP
This morning continues Sterling’s relative purple patch with early morning news of a surprise bump in house prices. A unexpected rise in January’s GfK consumer confidence index from -13 to -9 provided some backup for Sterling. This news seems to have papered over the negative news on manufacturing data, where we saw the lowest figures since June 2017 – in short, UK manufacturing continues to be trapped between a slowing of new orders and input cost inflation.

Sterling could receive a boost from the released data today if it were to go as predicted or exceeds forecasts.

USD

US private ADP employment report yesterday increased past market expectations to a strong 234K. Furthermore, US Employment Cost Index rose 0.6% in Q4 2017 while Chicago PMI decelerated less than expected to 65.7 in January.

The Federal Reserve said goodbye to Janet Yellen yesterday in a Fed decision that was, on the whole, uneventful. The target range was left in line with market expectations at 1.25-1.5% with a unanimous vote. The outcome was the FOMC predicting inflation will increase to the target of 2% over the medium term which warrants the hawkish stance of rate hikes. This opens the door to potentially four rate hikes this year. Expectations lie with a hike in March, June, September, and December.

Today we have ISM manufacturing PMI and ISM prices paid which will keep traders and investors on their toes.

EUR

Yesterday, Eurozone unemployment was unchanged at 8.7% for December, while CPI lived up to expectations, decelerating to 1.3% y/y along with core inflation dropping to 1.0% y/y. Further, German retail sales fell 1.9% in December but rose 2.8% y/y with the German unemployment rate demonstrating promising signs reading 5.4%.

The Euro largely weakened against the Pound throughout yesterday as levels were seen rising from 1.1350 to 1.1430. The Euro continues to be light in market moving data but a boost today could be seen in finalised Markit manufacturing PMIs. These will highlight the strength of the Eurozone economy.

European Central Bank (ECB) Chief Economist Peter Praet is due to give a speech later today.

Data to Watch:

9:00 Markit Manufacturing PMI (EUR, GBP)
12:30 Challenger Job cuts (YoY) (USD)
13:30 Initial Jobless Claims (USD)
13:30 Nonfarm Productivity (USD)
13:30 Unit Labor Costs (Q4) (USD)
14:30 Markit Manufacturing PMI (CAD)

 

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