27th February 2017 Market Update
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?? GBP – The pound on the whole had a very strong week, gaining over 1% against the dollar. The bulk of this gain came from Mark Carney’s speech and the UK’s inflation report which was slightly below expectations. However, this strong reading helped sterling maintain its momentum. Through the rest of the week the pound remained resilient.
The pound has dropped off slightly this morning, as traders re-position themselves for the week ahead. Later this week the pound will see PMI releases for manufacturing, construction and services, which are all expected to be a similar level to their previous results. Otherwise it’s a very quiet week for the UK.
?? EUR – Clearly the weakest major currency of the week was the euro, even with manufacturing and services data beating expectations early in the week as well as CPI staying in line with expectations. The current political risk in Europe appears to be weighing heavily on the euro.
Unfortunately for Europe, there are only three pieces of data that could give the euro the shove in the direction it needs. CPI and unemployment figures are due Thursday and both are expected to remain at current levels. Retail sales are being released on Friday and this is expected to come in line with the previous reading.
?? USD – With it being President’s Day on Monday there was very little movement from the US even with the aforementioned drop against the pound. The dollar started improving against the euro, following the FOMC minutes in which Janet Yellen suggested that 3 rate hikes this year is the target. For the most part the rest of the data last week was on target for the dollar.
The US dollar could have a strong week ahead; durable goods today are expected to improve which could prove to be the stepping stone on the route to that next rate hike. GDP will be released on Tuesday also president Donald Trump will speak to congress for his first major speech, though not necessarily economical the financial markets will be keeping an eye just in case he says something unexpected. CPI and manufacturing data will be the focus on Wednesday and that will wrap up the week for the US.
9.30am – Public Sector Net Borrowing: Expected to show a surplus of £14bn.
10.00am – BoE Governor Carney Speech and Inflation Report Hearings.
9.00am – Markit Services: Forecasted to remain at 53.7.
9.00am – Markit Manufacturing: Forecasted to drop marginally to 55′.
27/02/2017 13:30 – Durable Goods Orders, expected to improve impressively to 1.7%.
28/02/2017 21:00 – President Donald Trump’s speech.
Our View: Ongoing political uncertainty in Europe may weigh on the euro over the coming months. However, on Friday and since the markets opened following the weekend the pound has lost ground against both the euro and dollar. It does appear that the ground has been lost following the pound hitting upside resistance levels. This once again serves as a reminder that Sterling has a habit of losing ground against the dollar and euro far quicker than it gains it.
There will be additional scrutiny on the US this week with manufacturing data being released, along with Trump speaking before Congress.
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