Still waiting on reassurances
The Confederation of British Industry reported that UK manufacturing activity had weakened in the three months to February, although forward orders rose to 6 from -1 last month and exports also strengthened slightly. The Pound dipped after three Conservative MPs resigned to join the Independent group, reducing the government’s notional majority and increasing instability. The news has mixed implications for the Brexit process but has added to general uncertainty. General election speculation triggered Sterling to dip to near 1.3010 against the Dollar.
Theresa May and EU Commission President Juncker had “constructive talks” discussing reassurance over the backstop. Speculation over the progress and higher oil prices drove Sterling to near 1.3100 against the Dollar and 1.1500 on the Euro. There was, however, no evidence of a Brexit breakthrough with key Commons votes due next week.
The US Dollar continued falling slightly from yesterday’s lows and is trading down vis-à-vis the major currencies.
Minutes from January’s Federal Reserve meeting reiterated that a patient approach to policy was justified by softness in inflation with scope to hold rates. There were concerns over weaker global growth conditions and financial conditions had tightened. Several members stated that further rate hikes in 2019 might be necessary only if inflation is higher than baseline projections, although others were more confident that further rate hikes would be necessary. The committee was unwilling to adjust the pace of the balance-sheet run-off at this stage, although it reiterated that it was flexible in its approach. Almost all members thought it desirable to announce before long a plan to stop reducing the balance sheet later this year.
Underlying sentiment over the Eurozone remained negative, however, most bad news seems to have been priced in by the market which helped curb any fresh selling of the single currency. Versus the Dollar, the Euro peaked at 1.1370 despite the European Central Bank’s (ECB) Praet suggesting that the Eurozone outlook is fundamentally changing and the medium-term outlook would be crucial.
The IMF’s Lagarde piled more pressure on the Eurozone by commenting that there was likely to be a downgrade in Germany’s growth forecast, a statement that restricted any up-move of the Euro despite a weakening Dollar.
Data today includes CPI data out of Germany and the harmonized index of consumer prices which will be closely monitored, then later in the morning February’s Markit manufacturing PMI data out of Germany. PMI numbers out of Europe and the public sector net borrowing out of the UK will also garner some interest. Lastly, the Bank of England’s (BoE) Haldane speech and the ECB MPC meeting accounts at 12:30 GMT will round off the day.
Data to watch:
07:00 EUR Harmonized Index of Consumer Prices (YoY) (Jan) (Germany)
08:30 EUR Markit PMI Composite (Feb) (Germany)
08:30 EUR Markit Services PMI (Feb) (Germany)
08:30 EUR Markit Manufacturing PMI (Feb) (Germany)
09:00 EUR Markit PMI Composite (Feb)
09:00 EUR Markit Manufacturing PMI (Feb)
09:00 EUR Markit Services PMI (Feb)
09:30 GBP Public Sector Net Borrowing (Jan)
12:00 GBP BoE’s Haldane speech
12:30 EUR ECB Monetary Policy Meeting Accounts
12:50 USD Fed’s Bostic speech
13:30 USD Continuing Jobless Claims (Feb 8)
13:30 USD Initial Jobless Claims (Feb 16)
13:30 USD Philadelphia Fed Manufacturing Survey (Feb)
13:30 USD Durable Goods Orders ex Defense (Dec)
13:30 USD Durable Goods Orders ex Transporation (Dec)
13:30 USD Durable Goods Orders (Dec)
14:45 USD Markit Manufacturing PMI (Feb)
14:45 USD Markit Services PMI (Feb)
14:45 USD Markit PMI Composite (Feb)
15:00 USD Existing Home Sales (MoM) (Jan)
17:35 CAD BoC’s Governor Poloz speech
22:30 AUD RBA’s Governor Lowe speech
23:30 JPY National CPI Ex Food, Energy (YoY) (Jan)
23:30 JPY National Consumer Price Index (YoY) (Jan)
23:30 JPY National CPI Ex-Fresh Food (YoY) (Jan)