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January

Sterling awaiting Brexit talk… again

Published: Friday 04 January 2019

  • Eurozone data disappoints
  • Japan returns and sells
  • US and Canada employment data awaited
​​​​By David Johnson

Japan came back from an extended holiday and equities traders immediately started selling stocks. The Japanese stock indices were 2.5% lower in no time at all after poor Chinese data and the sharp spike to lower levels the previous night, prompted by Apple’s profit warning. We also hear that the Bank of Japan will be lowering their inflation outlook for the next two years to just 1.0%; down from 1.4% previously.
 
Sterling still stuck

Sterling is still trapped around €1.11 and $1.26 in spite of a sharp rise in shop prices; the fastest in six years, in fact, as reported by the British Retail Consortium. That positive news was tempered by an unexceptional house price report from Nationwide. A rise in average house prices of just 0.5% on the year is not inspiring, but is perhaps understandable, given the impending Brexit activity. The other scheduled data from the UK today is the Service Sector Purchasing Managers’ Index (PMI). These results were not inspiring, either, with new business growing at a modest rate, but lower business confidence and jobs growth reported. This sector does account for the bulk of UK Gross Domestic Product (GDP), so it is a very important benchmark for the UK economy. Other than this, though, the Pound will be driven by external data and by any mention of the ‘B’ word.
 
The calm before the storm?

The markets have calmed a little after it was announced the US and China would hold trade talks on the 7th and 8th January, but the US market is prepared for an interesting employment report this afternoon. The weekly data was strong but that doesn’t necessarily translate into a strong monthly employment stats. The political manoeuvring around the budget for ‘The Wall’ and the partial government shutdown is still dominating US news but the US –China trade talks are important and  anything the US President Tweets is taken at face value, no matter how banal or insane the message is.
 
Euro weathers data disappointment

The Euro didn’t really react to the improved service sector indices from Italy and the dreadful one from France. There is a lot of concern over the French budget after President Macron made some very expensive concessions to the hi-viz protestors. However, the Euro did weaken a little when the Eurozone and German PMIs were worse than forecast. The Eurozone composite PMI was at its weakest level for four years.
 
Canada awaits employment figures

As well as the US employment data, the Canadian employment statistics will also be released this afternoon. A slightly slower job growth rate is expected and that, plus changes to the labour pool, may even equate to a small rise in the unemployment rate, but, even if it moves to 5.7%, that is an extraordinarily strong figure for a country of such immense size with such a dispersed population.
 
Happy New Year!

And then it is the first weekend of 2019 and we can all finally start to catch up on which day of the week it is. The next challenge is to stop writing 2018 on the date and then it is the complicated job of disposing of all the chocolates you don’t like from the tubs that are so abundant at Christmas. In our house, the ones left are the mini Bounties, the strawberry and orange creams and anything with cherry cream in it. I am happy to trade if you have toffees or any Toblerone left. Oh and Ferrero Rocher are welcome, just so we can feel like we are in an embassy

Joke 

An Alsatian, a Rabbit and a Cat meet after having been accepted through the Pearly Gates. They meet God as they arrive. He is sitting in a splendid throne near the entrance.
“Why do you believe you were accepted into heaven?” he asks the Alsatian.
“I was a loyal protector or my master. I worked in war zones with soldiers. I saved many lives”, said the proud Alsatian.
“Well you should join me and sit at my right hand side,” said God.
“And you, little Rabbit,” said God, “why do you believe you have been admitted to my realm?”
“Well I was a faithful companion to a poor little girl with a nasty disease. I kept her company and made her life more bearable.”
“That is a worthy endeavour,” said God. “You should take your place at my left hand. And you, my tom cat friend. Why do you think you are here?”
“What I think,” said the cat, “is that you are sitting in my seat”.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Net Lending to Individuals 5.0b 4.9b
GBP 09:30 UK: Services Purchasing Managers' Index 50.4 50.7
GBP 09:30 UK: Mortgage Approvals 67k 66k
EUR 10:00 EU: Consumer Price Index Flash Estimate 2.0% 1.8%
EUR 10:00 EU: Core Consumer Price Index Flash Estimate 1.0% 1.0%
CAD 13:30 Canada: Employment Change 94.1k 6.9k
CAD 13:30 Canada: Unemployment Rate 5.6% 5.7%
CAD 13:30 Canada: Raw Materials Price Index -2.4% 0.4%
USD 13:30 US: Average Hourly Earnings 0.2% 0.3%
USD 13:30 US: Non-Farm Employment Change 155k 179k
USD 13:30 US: Unemployment Rate 3.7% 3.7%

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news