UK Cabinet Reshuffle, US Inflation, and ECB Meeting Minutes Ahead09 January 2018 by FC Exchange
Politics could play an interesting part in currency market movement this week, say exchange rate experts FC Exchange.
GBP Exchange Rate Forecast – BoE survey ahead
– The pound slid at the start of last week against currency majors like the US dollar (GBP/USD) and Australian dollar (GBP/AUD) after weaker-than-forecast UK construction data was released. The Markit construction purchasing managers’ index (PMI) came in at 52.2 in December, even though economists had expected 53.0. This is the sixth fall in a row for this piece of data.
– Later in the week, sterling rose against currency majors such as the euro (GBP/EUR), Aussie dollar (GBP/AUD), and Swiss franc (GBP/CHF) as a collection of disappointing ecostats made their way onto the market and global risk appetite increased.
– The latest British Retail Consortium (BRC) shop price index came in at -0.6% in December as businesses gave discounts to shoppers on non-food items. Meanwhile, the food inflation pace increased.
– UK car registrations also experienced a fall in December, slumping by an unhealthy -14.4% on an annual basis – the most dramatic tumble since 2009.
– UK manufacturing also noted a downswing, with the latest Markit PMI coming in at 56.3 in December, following the previous 58.2 reading.
This week is a pretty quiet one for ecostats, with only a few moderate data releases throughout the week and one high-tier Bank of England (BoE) Credit Conditions and Bank Liability Survey report due on Thursday. The BRC will publish like-for-like sales data on Tuesday ahead of manufacturing, construction, trade balance, and growth estimate numbers emerging on Wednesday. Another factor that could influence sterling in the week ahead is Theresa May’s Cabinet reshuffle, and any comments on the Brexit situation.
EUR – Germany’s job growth sees unemployment fall
– The Eurozone inflation reading disappointed investors last week, with the annual December figure hitting 1.4%, down from 1.5% in the previous month. The ecostat has caused some concern considering the currency bloc’s recovery is improving in momentum and data has been relatively upbeat.
– Germany’s unemployment rate hit a record low last week at 5.5% in December (and November after data was revised), the lowest number seen since 1990’s German reunification. The number bodes well for German growth in the year ahead.
This week the euro might experience the majority of its movement on Thursday with the release of German growth numbers, industrial production and the European Central Bank’s (ECB) account of its most recent monetary policy meeting. There are a few other medium-tier data releases throughout the earlier part of the week, but the euro may feel the influence of different geopolitical factors too.
USD – US inflation numbers in focus
– The ISM manufacturing number showed the sector had fared well in December, with the index taking an upswing from 58.2 to 59.7. Additionally, the ISM prices paid showed another notable improvement from 65.5 to 69.0, highlighting growing price pressures.
– The highly anticipated US non-farm payrolls figure disappointed last week, printing at 148K rather than the 190K forecast for December. The previous month’s reading was revised higher to 252K.
– On Friday the ISM non-manufacturing/services composite index was published, highlighting a decline in activity, falling from 57.4 to 55.9.
It’s a relatively quiet week concerning economic data, until Friday when a few highly influential ecostats are scheduled for release. Monday’s Stateside session will see US consumer credit figures make their way onto the market, Wednesday will see mortgage applications data published, and Thursday will reveal weekly jobless claims ecostats. Meanwhile, Friday could see the USD exchange rate fluctuate on US inflation figures and advance retail sales numbers. December’s inflation reading is expected to slip to 2.1% from 2.2% on the year which could allow the US dollar to lose favour with investors.
AUD Exchange Rate Forecast – Aussie trade balance disappoints
– Last week the Aussie dollar to US dollar (AUD/USD) exchange rate gained as a USD selloff occurred in the market. Additionally, the Australian commodity currency was supported by speculation as to whether the Reserve Bank of Australia (RBA) would begin to lift its official cash rate as soon as the middle of the year.
– Less optimistic for the Aussie was the release of the nation’s trade balance findings. After some recent surpluses, the November number contracted at –AU$628 million; October’s reading was also revised to sink into deficit at –AU$302 million.
– This week has begun with the Australian performance of construction index printing weaker at 52.8 in December, down from November’s more positive 57.5.
– Tuesday will see the Australian building approvals number released.
CAD – Canadian unemployment rate drops to four-decade low
– Last week the Canadian manufacturing PMI inched higher to 54.7 in December, improving from 54.4 in November.
– The Canadian unemployment rate sank last week, falling from 5.9% to 5.7% in December – the lowest in four decades, despite forecasts to rise to 6.0%.
– There’s not a massive amount of significant Canadian economic indicators scheduled for release this week, but Tuesday will see housing starts data come to light, followed by building permits on Wednesday, and the new housing price index on Thursday.
NZD – New Zealand dollar has a positive start to 2018
– The New Zealand dollar managed to touch a three-month high against the US dollar (NZD/USD) last week following the weaker-than-forecast US non-farm payrolls reading. ANZ senior economist Philip Borkin said: ‘The NZD has started the New Year on the front foot, rising around 2% against the USD since 22nd December and is knocking on the door of US72cents – a three-month high.’
– New Zealand house sales figures will be out on Tuesday, ahead of building permits data on Thursday.
Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.
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