- EU data continues to disappoint
- US - China deal maybe imminent
The poor German data just keeps on coming. This morning’s German economic growth data showed zero growth in Q4 and just 0.9% year on year and we are expecting poor results from the Ifo institute’s business indices this morning. Eurozone
core inflation data is also forecast to show further deflation of circa 1.5% on the month. With such an obvious slowdown in the productive parts of the Eurozone, it will be very interesting to hear what European Central Bank president Draghi has to say when he speaks at 3.30pm (UK time). Meanwhile, the Euro is a tad weaker.
The GBPEUR exchange rate
starts the day clinging on to the EUR1.15 ledge by its fingernails. Further talks are expected between Mrs May and the EU side but the threats are flying like plates in a Greek restaurant. Jeremy Corbyn has been warned he’ll lose more MPs to the rebels unless he demands a 2nd
referendum, Prime Minster May has been told she will lose MPs to the rebels unless she tells the EU she won’t leave without a deal and everyone else is threatening something or other. There is no UK data
to focus on today, so we are stuck with MP type rhetoric to keep us occupied; gawd help us.
You may also find interesting:
Currencies expected to strengthen on US-China deal
Share markets in Asia were boosted by slightly more positive Chinese data
overnight and the growing feeling that a deal between China and the US is imminent. If a deal is finalised, that’ll boost the currencies of the countries that supply both economies with goods, raw materials and services. So expect strength in the Aussie, Kiwi and Canadian Dollars as well as the South African Rand and many of the Asian currencies.
Canadian data to be released
Speaking of Canada, we will see their retail sales data this afternoon and the forecasts are for mildly better data than last month’s decline of 0.9%. That ought to give the CAD a boost; beware the CAD buyers.
USD to weaken unless a trade deal with China is achieved
From the American standpoint, the afternoon brings a slew of Federal Reserve (Fed) speakers, so lots of opportunity for hints of the Fed’s plans. It seems they are softening their stance and will at least pause on any normalisation of money supply and interest rates. The US Dollar has weakened a little of late but you have to wonder where it might be if the Fed hadn’t become more dovish. There is certainly scope for USD weakness unless a deal can be done with China. In that instance, things become a lot more uncertain but the USD should strengthen.
On this day…
Those involved in the US China affair may be cognisant of this day in 1973. On that day, Richard Nixon reached an agreement with The People’s Republic of China to establish liaison offices in each other’s countries.