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Trump accuses Germans of skulduggery

Trump accuses Germans of skulduggery

Sterling suffered further month-end selling yesterday, falling to lows near 1.2400 against the Dollar and falling just below 1.1600 against the Euro. UK Consumer Credit rose by just £1bn to £193bn in December, the smallest monthly increase since May 2015. The news will be of some comfort to Bank of England Governor Mark Carney who had recently warned that personal borrowing was rising too fast.

Sterling selling eased in the afternoon as wider US losses also provided support with a move back to around GBPUSD 1.2580 while the Euro failed to maintain any gains beyond 1.1630 against the Pound. The BRC shop price index recorded a 1.7% decline in prices in the year to January.

The first parliamentary vote on Brexit will be held this evening, although barring any surprises there is unlikely to be a significant market reaction ahead of Thursday’s Bank of England monetary policy decision. Sterling edged slightly lower this morning as the US Dollar recovered ground ahead of the UK PMI data to be released this morning.

The National Institute of Economic and Social Research (NIESR) upwardly revised its forecasts for UK growth to 1.7% this year and 1.9% in 2018. However, both would still be a slowdown from the growth rate of 2% recorded for 2016, when the UK was the world’s fastest growing developed economy. NIESR predicted inflation would rise too, hitting household spending.

The US Dollar was on course for its worst January in three decades after another sell-off was triggered by poor US data and Donald Trump “talking down” the Dollar. Trump’s comments came just hours after his top trade adviser, Peter Navarro, told the Financial Times that Germany is using a “grossly undervalued” Euro to gain advantage over the United States and its own European partners.

The Chicago PMI index dipped to 50.3 for January from 54.6 previously as orders slid into contraction. Consumer confidence declined slightly to 111.8 from 113.3 as increased positivity surrounding the present economic situation was offset by weaker confidence in the outlook.

The Dollar remained under selling pressure, but the Euro was unable to hold above the 1.0800 level and edged lower this morning as the Dollar regained ground ahead of today’s Fed monetary policy statement; no rate change is expected.

German unemployment figures showed a drop of 26,000 in January, the sharpest monthly decline for over two years. Eurozone inflation for January beat expectations with the preliminary reading revealing a rise of 1.8% (year on year) from 1.1%, versus expectations of 1.6%. The core rate, however, was in line with expectations and unchanged at 0.9% which will dampen European Central Bank (ECB) inflation concerns.

Data to watch: 8am EUR Eurozone Non-Monetary Policy Meeting. 8.55am EUR German Markit Manufacturing PMI (Jan). 9am Euro Markit Manufacturing PMI (Jan). 9.30am UK Markit Manufacturing PMI (Jan). 10am EUR EC Economic Growth Forecasts. 1.15pm US ADP Employment Change. 2.45pm US Markit Manufacturing PMI (Jan). 3pm ISM Manufacturing PMI & Prices Paid. Construction Spending. 7pm US Fed Interest Rate Decision & Monetary Policy Statement.

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