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Sterling slips on yet more Brexit rhetoric

Published: Thursday 01 March 2018

  • Eurozone inflation dips a little in February
  • Huge US data diary may weaken USD
​​By David Johnson

Happy St David’s Day. Well I say ‘happy’ but those poor souls stuck on the M80 must be wondering what they did to offend the gods. Wherever you are, I hope you are managing to stay warm and safe.
The financial world carries on regardless. Sterling slipped through the last day of February as the rhetoric flowed over the EU’s proposed Brexit deal and the UK’s rejection of their plans for Northern Ireland to remain part of the EU customs arrangement. Brinksmanship is in fluorescent and vivid evidence. The news overnight brought a small drop in UK house prices, as calculated by Nationwide and we will get mortgage and credit data later this morning. A small drop in credit but a small rise in mortgage lending are forecast. We shall see if that steadies the Pound.
There hasn’t been a lot of hard data to concentrate on, so it is no surprise that the political shenanigans have been driving market views. We did see Eurozone inflation slip a little in February but that won’t impact the Euro Central Bank’s interest rate plans much. US Gross Domestic Product growth came in as expected in the 2nd estimate. A 2.5% annualised figure was exactly what the forecasters ordered.
This afternoon brings one of the Federal Reserve’s favoured measures of the state of the US economy. Personal income and expenditure data offers an insight in to consumer activity that shapes the Fed’s thinking and the forecasts suggest we will see a fall in both measures. That’ll weaken the USD because it undermines the Fed’s ‘higher interest rate’ imperative. The US Data doesn’t end there though…no Sir-eee. The ISM manufacturing sentiment index is forecast to be poor; construction spending likewise and Jerome H. Powell, the new Federal Chairman, testifies for the first time on the biannual Monetary Policy Report. He will be questioned about the report by the Financial Services Committee. A big day for the new man.
Overnight tonight, we are expecting to see a sharp upturn in Japanese inflation and a small drop in the unemployment rate. If you have Yen requirements, beware of significant shifts overnight but consider automated orders to protect yourself or take advantage.
Friday will be a big day for the Pound. We get a speech from the UK Prime Minister on Brexit and a speech from the governor of the Bank of England. Much to concentrate on.
And there is proof that there is nothing wrong with America’s relationship to assault rifles. In a church service in the Pocono Mountains, about 100 miles north of Philadelphia, worshipers brought their AR-15 rifles and had them blessed because they believe their ‘rods of iron’ could have saved lives in the Florida school shooting. The fact that they are more than 1,100 miles away appears to be irrelevant. That all seems perfectly rational to me. Nothing to see here. Move along.
Dinner for two
A guest calls the waiter and complains, “How come there are no chairs at our table?!”

The waiter shrugs, “I’m sorry but you only booked one table…”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Final Manufacturing Purchasing Managers' Index 58.5 58.5
GBP 09:30 UK: Manufacturing Purchasing Managers' Index 55.3 55.1
GBP 09:30 UK: Net Lending to Individuals  5.2b 5.4b
EUR 10:00 EU: Unemployment Rate 8.7% 8.6%
CAD 13:30 Canada: Current Account -19.3b -17.8b
USD 13:30 US: Personal Spending 0.4% 0.2%
USD 13:30 US: Unemployment Claims 222k 226k
CAD 14:30 Canada: Manufacturing Purchasing Managers' Index 55.9 55.9
USD 15:00 US: ISM Manufacturing Purchasing Managers' Index 59.1 58.7

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