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March 2017

Sterling slips as Article 50 looms

Published: Friday 10 March 2017

  • Sterling slips as Article 50 looms
  • Euro boosted by upbeat European Central Bank tone
  • Dollar strengthens for variety of reasons
  • US employment report awaited
By David Johnson
The drum roll continues as we build towards the triggering of Article 50 and the commencement of Britain’s exit negotiations with the EU. Sterling is sliding, in spite of the positive data emanating from the UK. The newspapers are still incandescent about the government wanting to rebalance National Insurance contributions and that has distracted from the Brexit stuff to some degree.
Sterling is at a seven week low against the Euro and the US Dollar as traders prepare and there is certainly scope for further Sterling weakness when the stark reality of Brexit hits after the negotiations are triggered. We’ll get a slew of data at 9.30am GMT, including the inflation attitudes survey, industrial and manufacturing output data, and the trade deficit figures. Undoubtedly, these will cause some volatility, but I doubt the Pound will have the gumption to rally.
There isn’t a lot of Eurozone data today, but the markets are still absorbing the positive European Central Bank (ECB) comments from yesterday. Mario Draghi’s very upbeat declaration that the Eurozone economy is improving and inflation is returning has boosted the Euro.
This afternoon’s main focus will be the US Employment report. With the Federal Reserve hovering over the trigger to raise interest rates, a positive showing in the labour market would ease their fingers slightly closer. Anything above 200,000 new jobs being created would be a positive result and will add to the strength of the already overbought US Dollar. It should also be noted that some of this USD strength is probably emanating from the rising tensions in Asia as North Korea tests intercontinental ballistic missiles, South Korea raises its preparedness and the US installs the Terminal High Altitude Area Defense (THAAD) missiles on South Korean Soil. China is not happy about that and this story could well escalate tensions and strengthen the US Dollar; the ultimate safe haven in such circumstances.
We will also get the Canadian employment data this afternoon. It is likely the numbers will be in line with last month’s. A 6.8% unemployment rate is still high but, as long as there are fresh jobs created, the Canadian Dollar is likely to benefit from the news.
And the other drum roll running in the back of my head is the precursor to the England versus Scotland game in the Six Nations rugby. It’s gonna be a corker.


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Today's Major Economic Releases

EUR Day Two Economic and Financial Affairs Council Meetings (ECOFIN)    
GBP 09:30 UK: Manufacturing Production 2.1% -0.6%
GBP 09:30 UK: Goods Trade Balance -10.9b -11.1b
GBP 09:30 UK: Construction Output 1.8% -0.3%
GBP 09:30 UK: Industrial Production 1.1% -0.4%
CAD 13:30 Canada: Employment Change 48.3k -4.9k
CAD 13:30 Canada: Unemployment Rate 6.8% 6.8%
USD 13:30 US: Average Hourly Earnings 0.1% 0.3%
USD 13:30 US: Non-Farm Employment Change 4.8% 4.7%
USD 13:30 US: Employment Rate 4.8% 4.7%

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