15th May 2017 Market Update
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?? GBP – Last week’s highlight for the UK was Thursday’s interest rate decision. As expected, 7 of the 8 MPC members opted to keep interest rates at record lows of 0.25%. This had generally been expected by the market, however what did surprise the market was the Bank of England opting to lower the UK’s growth forecast, weakening Sterling. Despite this, sterling remains at some of the highest levels against the dollar and euro since the start of October.
This week CPI is being released Tuesday, and this is expected to further overshoot the Bank of England’s target. Following on from this average earnings is released Wednesday and retail sales Thursday. Polls from the general election could impact the market, however Theresa May still looks on course to comfortably win the general election.
?? EUR – As the polls had indicated, Macron won a sizeable majority in the French elections, meaning there was not a significant impact on the market. Otherwise, there remained little data of note from Europe last week.
Over the weekend, Merkel won a surprise regional election in north-Rhine Westphalia. Although it had minimal market impact, it will be seen as a morale boost in the build up to the general election in Germany, later this year. This week, European CPI will be in the spotlight on Wednesday, as this will be a key determinant for when interest rates will rise. There is also flash GDP for the Eurozone along with German ZEW economic sentiment Tuesday.
?? USD – The first half of last week was quiet for the US. The weekly unemployment figures were released Thursday along with PPI, which came in above expectations. Friday CPI and retail sales were released from the US. This all came in below expectations which in turn weakened the dollar.
This week is quieter than last week for the US on the data front, with the only data of note being building permits on Tuesday, crude oil inventory figures Wednesday and weekly unemployment data Thursday. It is normally quite unlikely for these pieces of data to significantly impact the market.
16/05/17 – 9:30 am – CPI y/y.
17/05/17 – 9.30 am – Average Earnings Index.
18/05/17 – 9.30 am – Retail sales.
17/05/17 – 3.30 pm – Crude Oil Inventories.
18/05/17 – 1.30 pm – Unemployment claims.
16/05/17 – 2:30 am – Monetary Policy Meeting Minutes.
18/05/17 – 2.30 am – Employment change, unemployment rate.
16/05/17 – 3:00 pm – GDT Price Index.
19/05/17 – 1.30 pm – CPI, Core retails sales.
Our View: Sterling still has a relatively strong position against the euro and dollar. However, last week showed clear resistance on the upside for Sterling against the US dollar. CPI will be in the spotlight for Europe and the UK this week. In the UK the general election looks a foregone conclusion, with some polls suggesting a landslide victory for May.
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