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February

Sterling braced for Mark Carney

Published: Monday 25 February 2019

  • Further poor German data expected
  • US Gross Domestic Product and China trade deal will rule the US Dollar this week

The exchange rates in the market today have the appearance of Groundhog Day; very similar to those that accompanied the end of last week. The week ahead brings all manner of potential springboards and trip plates for a number of currencies, though.
 
Could Carney burst the Pound’s bubble?

For the UK, Brexit manoeuvres remain the overriding story du jour. Theresa May is at the centre of a whirlwind of politics and negotiation, with self-interest, vested interest and in a few exceptional cases, actual good old fashioned national interest is at play. Aside from that, the Governor of the Bank of England will speak today, so Sterling traders will be nervous at 10:00am because, as I have mentioned a number of times, Mark Carney does seem to have the pin that deflates the Pound whenever he speaks. We also get the inflation report tomorrow and manufacturing data on Friday. But be ready for the unexpected as far as Brexit goes.
 
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Spotlight on China-US and central bank talks

The overriding story for the US is the China-US trade relationship. That is not likely to be settled this week, but there are rumours of a package of six deals that could be settled soon. I suspect the US President will want one of those press call photo ops to announce such a thing and we haven’t been made aware of any flight to Beijing. There are other stories, though, and the primary one is that we believe the US economy slowed in Q4 to approximately 2.6%; down from 3.4% in the previous quarter. The head of the US central bank is in action on Tuesday as Jerome Powell testifies to the Joint Economic Committee about the economy and the Federal Reserve’s management of it. There is a smattering of other US data, but these are the highlights.
 
Focus on Germany for the Euro

For the Euro, there will be a lot of emphasis on this week’s German data. We have been assailed with poor German manufacturing and output data of late, so this week’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) could well be a shocker. The forecasts in the market are for something like last month’s index reading of 47.6 (below the growth level of 50+). I suspect these may be a tad optimistic. The Euro is under a little pressure.
 
Asia Pacific also looks to manufacturing data on Friday

Far Eastern and Australasian markets will be watching China’s Caixin Manufacturing PMI, due for release on Friday. Recent weak Chinese data is impacting the currencies of China’s suppliers, so another poor release will do more damage.
 
The Prince of Tides

And, in a slightly bizarre event, a dead humpback whale calf has been found in the midst of the Amazon jungle, miles from the deep water in which it would normally have swum. Scientists, trying to work out how the 10 tonne, 11 metre-long mammal managed to find its way so far from the sea can only speculate about freakish waves and tides. A sad and mysterious end to a beautiful creature.
 
On the Pier

All along the pier there were fishermen with lines in the water, baiting hooks, reeling in spinners and lures or landing fish. They had a variety of rods and reels, some of which were state-of-the-art affairs with lights and bleepers etc.  Among them was a young boy fishing with a bent pin, a ball of string and some bread for bait. Beside him was a fish weighing over 10 kilos. His mate came down to the pier and asked him about his catch:

"What kind of fish is it, Mike?"

"I don't know, but that chap over there with the carbon rod says he thinks it is a ruddy fluke."
 
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