Unlucky number 7
The Labour party’s crisis provided a temporary distraction yesterday when seven MPs resigned their party membership. Implications for the Brexit debate will be mixed, and the Pound’s reaction was limited. Underlying uncertainty has increased modestly in light of key House of Commons votes due next week.
Irish Foreign Minister Simon Coveney is the latest to state there was no appetite across the EU to change the Withdrawal Agreement. However, Brexit Secretary Stephen Barclay stated that he had a positive meeting with Michel Barnier and even has another meeting planned for midweek; no evidence of substantive developments as yet. Sterling held above 1.2900 against the Dollar at the close of business and the Euro settled close to 1.1430.
This morning, UK labour-market data is expected to print a small increase in annual wages growth. Better-than-expected figures would maintain expectations of further medium-term Bank of England (BoE) rate hikes while a weaker release will likely weaken the Pound.
A coalition of 16 states filed a lawsuit against President Trump’s decision to declare a national emergency to fund the Mexican wall. Trading ranges overall were narrow with the US market holiday dampening activity.
There are no major US economic events scheduled until the release of January’s Federal Reserve minutes tomorrow.
The European Central Bank’s (ECB) Praet stated that if the Eurozone growth outlook were to slow, then guidance on interest rates could be re-evaluated and other measures could potentially be considered. He also expected near-term growth projections to be cut. The Bundesbank announced that it expects German growth to remain slow for the first half of 2019, but tried to downplay fears of a full downturn due to a stabilisation in the car sector.
Euro gains were hampered by fears that the US would impose tariffs on EU car exports. This prompted a strong response from Juncker who stated that the EU would renege on its agreement to buy US soya beans and LNG (liquefied natural gas). After spiking to 1.1335 versus the Dollar, the Euro finished around the 1.1300 mark.
Data today includes Swiss imports/exports, Italian industrial sales, EU current account figures and, most importantly, unemployment rates out of the UK. There is also UK average earnings and the German economic sentiment which will attract quite a bit of entertainment and the day will be rounded off by the ECB’s Praet speaking at 15.00.
Data to watch:
09:30 GBP Claimant Count Change (Jan)
09:30 GBP ILO Unemployment Rate (3M) (Dec)
09:30 GBP Average Earnings including Bonus (3Mo/Yr) (Dec)
09:30 GBP Average Earnings excluding Bonus (3Mo/Yr) (Dec)
10:00 EUR ZEW Survey – Economic Sentiment (Feb) (Germany)
10:00 EUR ZEW Survey – Current Situation (Feb) (Germany)
10:00 EUR ZEW Survey – Economic Sentiment (Feb)
N/A NZD GDT Price Index
15:00 EUR ECB’S Praet speech
21:45 NZD Producer Price Index – Input (QoQ) (Q4)
23:50 JPY Imports (YoY) (Jan)
23:50 JPY Merchandise Trade Balance Total (Jan)
23:50 JPY Adjusted Merchandise Trade Balance (Jan)
23:50 JPY Exports (YoY) (Jan)