23rd February 2018 Market Update
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?? GBP – A downward revision to fourth quarter growth in 2017 kept the pound muted yesterday, through a fairly choppy day otherwise. The lower GDP figure and disappointing jobs figures earlier in week raise further concerns if whether the BoE should consider raising interest rates in the near future, as was suggested by Governor Mark Carney recently. On the Brexit front, PM Theresa May concluded her eight-hour long meeting on deciding the government’s approach to Brexit, including how closely the UK will align with the EU after Brexit. Markets will expect to hear a statement from the PM next week after she presents to the whole cabinet.
Today, we have only the BoE member Dave Ramsden speaking at midday on the UK’s productivity challenge at an event held by the Confederation of British Industry, though this will be unlikely to move the markets.
?? EUR – Minutes from the ECB monetary policy meeting yesterday showed that the ECB is reluctant to change its monetary stance at the moment but could revisit monetary policy early this year. In addition, the minutes showed that inflation is picking up at a faster pace than previously thought, thus boosting the euro. However, concerns of the strength of the euro were flagged as the ECB consider the EUR/USD rate unhealthy and required close monitoring.
Eurozone inflation figures will be watched closely this morning for any movement from the expected, given yesterday’s minutes an improvement could help strengthen the euro further.
?? USD – The dollar lost some ground against the pound yesterday after its surge on Wednesday night following the Fed minutes, with Fed members agreeing that the optimism over the US economic outlook increased the likelihood of further gradual rate increases.
The Fed will be in focus again this evening as it releases its Monetary Policy Report ahead of testimony from new Fed Chair Jerome Powell next week. This will be watched closely for comments on inflation and interest rates in comparison to the notes we had from Janet Yellen’s last meeting earlier in the week. Speeches from a few other Fed members will be thrown in the mix today for good measure too.
10:00am: CPI YoY (Jan) expected to remain at 1.3%
12:00pm: BoE Dave Ramsden Speech
N/A: Fed Monetary Policy Report
15:15pm: Fed’s William Dudley Speech
18:30pm: Fed’s Loretta Mester Speech
Summary: The pound manages to shrug off downward revised growth figures for Q4 2017 and a government meeting to decide on how the UK will approach Brexit and deal with the EU after Brexit. As there will not be any details released on the approach until next week, markets have largely ignored the meeting as there isn’t anything solid to go on as of yet. However, reports of the Labour party backing the UK to stay in a customs union with the UK won’t do any favours to the PM’s plans.
Elsewhere, the Canadian dollar fell to fresh lows as retails sales fell drastically into the red for the month of December.
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