Will Cameron’s all-nighter produce the goods today?
US CPI figures from January headline the economic data docket as the trading week nears closing. It is predicted that Core YoY inflation will remain unchanged at 2.1%. Slight gains on the Philly Manufacturing Index along with a fall in unemployment claims yesterday set up the Dollar for a strong start this morning after a relatively flat day yesterday, during which GBPUSD held around 1.4330.
There is a wave of data out this morning for the UK with both Retail Sales figures and Public Sector Net borrowing printing before 10am. Typically public sector borrowing doesn’t receive much attention from the market unless there is a significant drop or increase. Last month we witnessed a surprisingly upbeat figure which lent the Pound strength despite weak retail data. Retail sales are also out this morning, which will show us how much we have all been spending. Again, a good retail sales report will boost GBP.
However, all eyes will be on day two of the European summit, where David Cameron will be having ‘Brexit’ talks for breakfast, as he promised Britons he would get the best deal for the nation. The outcome of the EU meeting could decide the fate of the UK’s membership ahead of the referendum. A positive outcome would bode very well for Sterling, as it would suggest that the Bank of England (BoE) would no longer have to face Brexit uncertainty and would be able to focus on raising rates if the economic data were strong enough going forward.
Due to a stronger equity market and rising oil prices there was a general Euro softness yesterday as investors went in search of riskier assets. GBPEUR had opened around the 1.2800 levels yesterday, but after a renewed wave of buying interest for the Pound the pair rose sharply to find resistance at 1.2970. However the single currency did find some strength and opened this morning at the lower end of 1.2900 range.
Data to watch: 9.30 UK Public Sector Net Borrowing. 9.30 Retail Sales 1.30pm US Consumer Price Index (Mom & YoY).