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February 2017

Sterling up on Brexit and Gross Domestic Product (GDP) expectations

Published: Wednesday 22 February 2017

  • Sterling up on Brexit and Gross Domestic Product (GDP) expectations
  • Euro weaker as Le Pen gains support in France
  • USD strengthens ahead of Federal Open Market Committee (FOMC) meeting minutes
By David Johnson
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In spite of positive Purchasing Managers’ Indices (PMI) from across the Eurozone yesterday, the Euro is weaker this morning. The GBP-EUR rate is up in the €1.18 area and EUR-USD is down around $1.05. A growing feeling that Marine Le Pen might make significant gains in the French Presidential elections and her threats to remove France from the Eurozone are considered to be very real. Le Pen would probably not be where she is in the polls if her opponents weren’t entangled in a mire of controversy. Parallels with the US Presidential Election are hard to avoid. Euro traders will be watching for this morning’s release of Eurozone Inflation data. It’s a second estimate of the January numbers and should be around 1.8% on the year.
 
Sterling had a good day yesterday as the Euro declined. Sterling’s advance was also driven by the House of Lords decision not to oppose the Article 50 bill, even after 20 hours of the same arguments being voiced in a variety of ways. The release today of the second assessment of Q4 GDP also seems to have brightened the mood amongst traders. The first estimate gave us a 2.2% annual growth rate but there is a feeling the second estimate, which involves a lot more resolved data, might show and uptick on that. The UK economy is flouting the doom merchants at the moment and Sterling is probably undervalued even at these levels.
 
US interest revolves around the Federal Reserve’s meeting minutes, which will be released at 19:00 GMT. All anyone really wants to know is when the Fed will make its next interest rate hike. Hundreds of words in the minutes will be ignored as traders search for that snippet…assuming the message is there…and is clear. The message is often shrouded in central-bank-speak. Good luck with that, everyone. 
 
This afternoon brings Canadian Retail Sales data and the forecasts suggest a healthy level of growth. If you are a buyer of Canadian Dollars, you may wish to do so before that data is released, to mitigate the risk of CAD strength.
 
And the widely unpopular president Trump may wish to tell us about his pizza preferences if he wants to curry favour with the US public. Gudni Thorlacius Johannesson is the president of Iceland and he has a 97 percent approval rating amongst the Icelandic populace. His latest announcement is that he believes pineapple on pizza should be banned. He mentioned it during a trip to a school. That isn’t the reason for his popularity, but if Trump has a dig at anchovies on pizzas…..well, it couldn’t do any harm.
 

At the Surgery 

 
A mother storms into a doctor’s surgery and asks, “Can a nine-year-old perform an effective appendectomy?”
The doctor is taken aback and says, “Of course not. It’s a very complicated and precise operation. It takes seven years of medical trai….”
She doesn’t allow him to finish but turns to her son and says, “What did I tell you? Now go and put it back.”
 

Today's Major Economic Releases
 

Market
BST
Data/Event
Previous
Expected
GBP 09:30 UK: Second Estimate Gross Domestic Product 0.6% 0.6%
GBP 09:30 UK: Prelim Business Investment 0.4% 0.0%
EUR 10:00 EU: Final Consumer Price Index 1.8% 1.8%
EUR 10:00 EU: Final Core Consumer Price Index 0.9% 0.9%
CAD 13:30 Canada: Retail Sales 0.2% 0.1%
CAD 13:30 Canada: Core Retail Sales 0.1% 0.8%
USD 15:00 US: Existing Home Sales 5.49m 5.55m
USD 18:00 Federal Open Market Committee Member Powell Speaks    
USD 19:00 Federal Open Market Committee Meeting Minutes    

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