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March 2017

The Pound continues its woes

Published: Monday 06 March 2017

  • The Pound continues its woes
  • Upbeat Eurozone data helps drive Euro higher
  • The Reserve Bank of Australia (RBA) likely to hold rates at 1.50%
By Joe De Berniere
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The Pound performed poorly last week across the board dropping to one month lows of below 1.16 vs EUR and 2 month low vs USD at 1.2230. A Gfk Consumer Confidence survey reported a dip from -5 to -6 as families fear that their finances will be worse over the coming year. Sterling was pushed lower in the middle of the week as UK factory slowed in February as the Manufacturing Purchasing Manager’s Index (PMI) dropped from 55.9 to 54.6.  UK Construction data bucked this trend on Thursday with a gentle rise in the Purchasing Managers’ Index from 52.2 to 52.5 but as the sector is a small percentage of Gross Domestic Product (GDP), this did little to boost the Pound.  The week was capped off with Friday Service Sector PMI which also disappointed at 53.3 suggesting that alongside the poor Manufacturing data, we could see UK’s first quarter growth to fall below 0.4%.
 
The Pound also fell on last week’s session amid reports Nicola Sturgeon was planning to call for a second independence referendum this month.  Further talk of separatism will only damage the UK as a whole and most likely weaken the Pound.  Upbeat Eurozone data helped drive the Euro higher vs a deflated Pound - most notably Germany’s Consumer Price Index (CPI) saw German inflation rise for the 10th consecutive month - reaching its highest levels since 2012 of 2.2%. Eurozone services data also impressed on Friday with the market now suggesting that the European Central Bank (ECB) will rethink its Quantitative Easing (QE) programme. The ECB do meet later this week and there is a chance that there may be some subtle changes to their risk assessment as they decide that risks may have become more two way. It's unlikely that there will be any change in monetary policy however a move in June cannot be ruled out.
 
The US Dollar will be in vogue this month as we await Non-Farm Payrolls on Friday. The report is expected to show that jobs increased outside of the agricultural sector by around 190,000. If this is proved to be the case then the calls for a rate hike in March will grow ever louder. Janet Yellen intimated as much on Friday and markets have pretty much priced in a hike at the March 15th meeting. Two more hikes are expected this year which should see the Dollar continue its move upwards.
 
So far today, we’ve had Australia retail sales which have come out exactly as forecast at 0.4%. The Reserve Bank of Australia (RBA) is likely to leave rates on hold at their meeting tomorrow. The message will likely be balanced as growth data has been pretty robust and the economic landscape has been fairly positive the central bank be on hold for some time yet.
 
Later on we have Eurozone retail PMI and EU Sentix Investor Confidence. Other than that, a very light day for data.  The big release this week will be Wednesday’s Annual Budget Release – where the government outlines its budget for the year.  On Thursday we have ECB’s interest rate decision expected to remain at 0.00% and then on Friday UK Manufacturing Production.
 

The wrong way

 
A man in his car is driving home from work when his wife rings him on his mobile.

"Honey," she says in a worried voice, "Please be careful. There was a bit on the news just now, some lunatic is driving the wrong way down the highway." 

"Oh it's worse than that," he replies, "there are hundreds of them!" 
 
 

Today's Major Economic Releases
 

Market
BST
Data/Event
Previous
Expected
EUR 09:00 EU: Retail Purchasing Managers' Index 50.1 50.1
EUR 09:30 EU: Sentix Investors Confidence 18.8 17.4
USD 15:00 US: Factory Orders 1.3% 1.1%

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