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March 2017

Sterling continues to strengthen

Published: Friday 31 March 2017

  • Sterling continues to strengthen
  • Brexit fears knock Euro
  • NZ business confidence slips again
By David Johnson
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Day two of the Brexit negotiations period and it’s all kicking off. Threats and warnings abound, while the Scottish First Minister opts for guerrilla tactics in trying to ambush the British Prime Minister over another ‘once in a lifetime’ independence vote. “Keep calm and carry on” is the best policy for Theresa May, as the 27 remaining members of the EU discuss Britain’s departure today.
 
In spite of all the furore, Sterling held up well on Thursday and even gained ground in some areas. We end the week with UK Q4 Gross Domestic Product (GDP) figures, which have the capacity to improve slightly on the previous estimates. That would boost the Pound.  We’ll also get the current account balance, which we think will have narrowed marginally and we’ll have a speech from Andy Haldane, who holds the snappy title of “Chief Economist and Executive Director of Monetary Analysis and Statistics” at the Bank of England. (Massive business cards…huge!) If he hints that the Bank of England (BoE) might be edging closer to a rate hike, that will also be positive for Sterling.
 
The Euro is having a more troubled time. Perhaps it has dawned on traders that Brexit could be bad for the Eurozone and for the EU generally. The Euro is weaker against Sterling, the USD and others. Eurozone inflation is due for release this morning and that is expected to be a tad lower than last month’s 2.0% figure. Less pressure on the ECB to look at interest rate hikes, then, and it would therefore leave further room for Euro weakness. 
  
The US and Chinese Presidents meet next week and their approaches have been very different. President Xi said the meeting can be a new starting point for the US and China to become “great partners”. President Trump tweeted that the meeting will be “a very difficult one”. In the meantime, we will get US income and expenditure data this afternoon and that is likely to be mildly positive for the USD.
 
It is the last day of the month and the quarter and it is the last day of the financial year for a lot of UK companies. There is a significant risk of volatility today and, particularly over late trade into the US close. This is another opportunity for those with any sort of requirement to place automated orders to do your bidding as the markets shuffle ahead of the trading day. Have a word with your Halo Financial currency consultant to see how that could work for you.
 
NZ business confidence declined again in March, as shown by overnight data from the ANZ Business Outlook. A net 11% of the companies that were surveyed are optimistic about the general outlook for the economy. That is much lower than last month’s 16.6% percent in February. The NZ Dollar weakened a little on the news.
 
This afternoon’s data also brings Canada’s GDP growth data. A small slowdown is expected and the Canadian Dollar may well weaken a tad on that news, if the forecasters have got it right of course…
 
It is Kindness Day in the UK, so I will spare you any corny jokes. (Kindness personified, that’s me!)
 
And it is April Fool’s day tomorrow, so trust no one and believe nothing you see or hear. Kind of the antidote to kindness, isn’t it. 
 
See you in April. 
 


Some suggested honest product tag lines

 
Monopoly – Destroyer of family harmony
Lego – Foot pain for the unwary
Bic – You probably didn’t buy it
Netflix - 90% searching 10% watching
iPhone – you bought the hype, sucker!
Google – We know more about you than anything else
Southern Rail – We occasionally run trains
Lush – Scent induced high street headaches
Argos – You can only see it when you’ve paid
 
 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Current Account -25.5b -16.3b
GBP 09:30 UK: Final Gross Domestic Product 0.7% 0.7%
EUR 10:00 EU: Consumer Price Index Flash Estimate 2.0% 1.8%
EUR 10:00 EU: Core Consumer Price Index Flash Estimate 2.0% 1.8%
CAD 13:30 Canada: Gross Domestic Product 0.3% 0.3%
USD 13:30 US: Core Personal Consumption Expenditures Price Index 0.3% 0.2%
USD 13:30 US: Personal Spending 0.2% 0.2%
USD 14:00 Federal Open Market Committee Member Dudley Speaks    
USD 14:45 US: Chicago Purchasing Managers' Index 57.4 57.2

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