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February 2017

Sterling bouncing as UK data still beats forecasts

Published: Wednesday 01 February 2017

  • Sterling bouncing as UK data still beats forecasts
  • NZ Dollar weaker as unemployment rate surges
  • US Federal Reserve likely to put rate hike on hold but timing of next one hoped for
It would seem that MPs are sticking to the Sun Tzu theory that you should choose your battles and don’t fight battles that cannot be won. The bill to trigger the Brexit negotiations is likely to be passed by the House of Commons and the Lords are highly unlikely to oppose the will of the people. The Guardian newspaper is reporting that the whitepaper on Brexit will be published tomorrow. Little wonder then that Sterling is at sixes and sevens; ducking and diving like a good ‘un. The Nationwide Index showed 4.5% UK house price inflation in 2016, but they are predicting that will slow to 2.0% in 2017. But we all know how accurate predictions have been of late, don’t we? We will get the UK Manufacturing Purchasing Managers’ Index (PMI) this morning and that is expected to show improvement as the weaker Pound boosts export demand.
Overnight, the New Zealand Dollar weakened on a surprise upturn in the unemployment rate. It is back up at 5.2%, when most analysts predicted a drop to 4.8%. An influx of new people into the workforce pool is being cited, but the data is a setback to those who were starting to think of interest rate hikes from the Reserve Bank of New Zealand (RBNZ).
There is a smattering of EU data today as well, but there is not much likelihood of major Euro movement, unless it is foisted upon the shared currency by moves in the US.
The rest of today’s tier one data is American in nature. Aside from the battle raging over the travel bans and the appointment of another conservative Supreme Court judge, the US Manufacturing Index is expected to be a positive one, but we are likely to see a small decline in construction spending and the Federal Reserve is highly unlikely to make any change to their base rate later today. They may hint at rate hikes later in 2017, though, and that would strengthen the US Dollar. If you have dollars to buy, you may wish to act before the Federal Reserve announcement at 19:00 GMT. The US Dollar is a tad weaker, though, after America accused Germany, Japan and China of manipulating the currency markets to gain a trade advantage through weaker domestic currencies. They are not winning friends and influencing people are they? All except Theresa, that is…
And the Daily Mirror (and maybe others) are running a story about how the Queen hid behind a bush to avoid having to meet the Romanian Dictator, Nicolae Ceausescu. They say history has a habit of repeating itself.


I said to this personal trainer, “Can you teach me to do the splits?” He said, “How flexible are you?” So I said, “I can make it any afternoon next week if that helps?”

Today's Major Economic Releases

EU: Final Manufacturing Purchasing Managers' Index
GBP 09:30 UK: Manufacturing Purchasing Managers' Index 56.1 55.9
USD 13:15 US: ADP Non-Farm Employment Change 153k 165k
USD 14:45 US: Final Manufacturing Purchasing Index 55.1 55.1
USD 15:30 US: Crude Oil Inventories 2.8m 2.6m
USD 19:00 US: Federal Open Market Committee Statement    
USD 19:00 US: Federal Funds Rate <0.75% <0.75%
Daily Currency Analysis by David Johnson