6th March 2017 Market Update
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?? GBP – In a week with very little data released, the pound lost ground across the board, as political risk came back into focus as the government suffered its first parliamentary defeat over the Article 50 bill. In addition manufacturing and services figures for February missed targets adding to Sterling woes, even though construction and consumer spending was up.
This week, all the UK data is scheduled for Friday, as consumer inflation expectations, manufacturing and industrial production, along with trade balance and GDP estimates, all due.
?? EUR – Inflation finally hitting the 2% ECB target in the Eurozone was the main focus of last week and helped the euro regain some lost ground toward the tail end of the week. However, the lacklustre unemployment figures unchanged at 9.6% and poor services and retail sales figures likely limited further gains.
The ECB meeting on Thursday will be particularly crucial, as questions about the quantitative easing program will be asked, as Eurozone inflation numbers are close to the ECB target. In addition, Eurozone Q4 GDP (3rd Estimation) figures will be released, but unlikely to be changed from the previous.
?? USD – Last week, US GDP slightly disappointed the market, however the result was still seen as a relatively strong reading and the dollar also benefited slightly from better than expected consumer confidence result. However, the main event was President Trump’s first address to Congress, which disappointed the market initially, due to the speech failing to address any changes to taxes and tariffs. However, following the speech, the dollar strengthened and the market renewed its focus on the USA’s next interest rate rise. On Friday, Fed Chair Janet Yellen, hinted at the likelihood of a rate rise this month, as long as economic data continued to remain on track, with markets now pricing in an 80% chance of a hike this month.
Jobs data will be the focus this week, with the all-important non-farm payrolls and unemployment figures on Friday. Unemployment is expected to fall to 4.7% and could provide a positive end to the week for the dollar, though payrolls are expected to drop significantly from the previous month.
During the week, we have factory orders today, though unlikely to cause any change and the ADP unemployment change figure on Wednesday.
09:30 – Consumer Inflation Expectations.
09:30 – Manufacturing Production for January expected at -0.5% from a previous 1.3%.
09:30 – Industrial Production for January expected at -0.1% from a previous 2.1%.
15:00 – NIESR GDP Estimate.
10:00 – 3rd Estimate GDP Q4 2016 expected unchanged at 0.4%.
12:45 – ECB Rate Decision.
13:30 – ECB Monetary Policy Statement & Press conference.
06/03/2017 – Today
Factory Orders expected at 1.2% from 1.3% previous.
ADP Employment Change expected at 180k down significantly from 246k previous.
Non-Farm Payrolls expected at 180k down from 227k previous.
Unemployment Rate expected improvement to 4.7% from 4.8%.
Our View: Inflation expectations and the GDP estimate will be key for the pound in an otherwise quiet week. If these are positive, the pound fall could be halted and some reversal could be seen. The ECB meeting could be positive for the euro, given the recent positive inflation news and markets will be keen to see what happens to the current QE programme. Positive US jobs data will play well into the hands of the Fed and further bolster the view of a rate hike this month, helping the dollar.
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