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January 2017

Sterling shudders ahead of UK PM’s Brexit speech

Published: Tuesday 17 January 2017

  • Sterling shudders ahead of UK PM’s Brexit speech
  • Australian housing loans improve
  • UK inflation set to rise

Not a lot happened on Monday, but the Australian Dollar had a bumpy night. Housing loans are up more than expected and that is an AUD-positive development, but the Aussie Dollar is also a tad weaker on fears over the UK Brexit plans and what that will do for the global economy.
 
If the leaks are true, UK Prime Minister Theresa May is set to outline a Britain that can operate outside the EU and separate from it, but link with nations around the world, when she speaks later today. Sterling, which had dipped on the leaks, has bounced a little, but is likely to be volatile if anything the Prime Minister says is outside the known knowns. Before the PM stands up, we will get UK Inflation data and that is expected to show a further rise, as the weak pound increased import costs and as higher energy costs seep into UK consumer prices. The forecast 1.3% or 1.4% is still well below the Bank of England (BoE) target of 2.0%, but the threat of higher interest rates may well strengthen the Pound a tad.
 
With little hard data to focus on, traders are nervous ahead of Donald Trump’s Inauguration and the mayhem that might ensue as Trump’s interesting collection of supporters take their places for the next four years. Can’t wait!!! I suspect that, if we thought markets had been volatile thus far, in the misquoted words of (rather appropriately) Al Jolson, “we ain’t seen nothin’ yet”.
 
The rest of the day is given over to speeches by US Federal Reserve members and the German ZEW Economic Sentiment index. These ZEW surveys have been improving of late and that may well give the Euro a spring in its step.
 
And while President-Elect Trump harps on about protectionism and bringing jobs back to America, China is doing much the same. So much so, that a Chinese steel manufacturer can now make the vital element in the ball-point pen…the ball. China produces 80% of all the ballpoint pens in the world, but until now, has been unable to make the tiny balls that make the thing work. That has now changed. Today the ballpoint and tomorrow….gawd knows what!
 

Doctor

 
Patient - Doctor, my memory is getting much worse. I keep forgetting things.
Doctor - Like what?
 
Patient – Doctor, my son has just swallowed everything in his piggy bank.
Doctor – Give him this castor oil and we’ll see if there’s any change in the morning.
 
Doctor – I can see the problem Mr Jones. You are addicted to drinking brake fluid.
Patient – It’s not a problem, doc. I can stop any time I want.
 
Patient – Doctor, I think I need glasses
Greengrocer – Yes, you do
 
Doctor – You have acute Appendicitis
Patient – And people say my nose is cute, too
 
Doctor – I am afraid to say you’ll be dead in 15
Patient – 15 what? 15 years, 15 months…
Doctor – 14,13,12… 

 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
ALL Day One World Economic Forum Annual Meetings    
GBP 09:30 UK: Consumer Price Index 1.2% 1.4%
GBP 09:30 UK: Core Consumer Price Index 1.4% 1.4%
GBP 09:30 UK: Retail Price Index 2.2% 2.3%
GBP 09:30 UK: Producer Price Index Input -1.1% 2.2%
GBP 09:30 UK: Producer Price Index Output 0.0% 0.3%
EUR 10:00 EU: German ZEW Economic Sentiment 13.8 18.9
GBP 11:45 UK: Prime Minister May speaks    
USD 13:30 US: Empire State Manufacturing Index 9.0 8.1
USD 15:00 US: Treasury Secretary Lew speaks    
 
Daily Currency Analysis by David Johnson
 
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