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January 2016

Daily Currency Insight

Published: Friday 15 January 2016

  • Sterling slips on BoE pessimism
  • Barrage of US data ahead
As I sit to write this and contemplate a day in the very exciting world of foreign exchange. I realise just how much I can't compete with Tim Peake. HE IS ONLY GOING TO GET TO WALK IN SPACE FOR GOODNESS SAKE! Couldn't be more jealous. Sorry...did I think that in text? Good on you Major Tim.
 
As for my day, well it starts with the Pound a tad worse off than it was this time yesterday. The Bank of England offered quite a sombre view of the UK economy when they left the base rate on hold yesterday and that has knocked Sterling. The BoE are not alone in predicting a tough year ahead. Share markets have started the year by pressing the 'down' button and a slew of analysts are queueing up to predict doom and gloom for 2016. With China slowing, the EU not growing and interest rates diverging (I couldn't think of a rhyme for slowing and growing – sorry), there are plenty of reasons to be concerned.
 
Since when did we start trusting Chinese data? Why would the EU be able to grow with such massive unemployment and with zero inflation and with a reduced export market? That is not to say that 2016 won't be volatile. Oh boy oh boy will it be volatile. We have the UK referendum on EU membership to come, we will see whether the Federal Reserve has to reverse its interest rate hike and whether the ECB feels the urge to cut rates again. The BoE is, however, unlikely to raise their base rate this year in my humble opinion.
 
As for today, we've already had the Australian home lending which bucked the trend and was higher than expected. The Aussie Dollar strengthened a tad on the news. This morning will bring UK construction spending data which is likely to be pretty flat but the interesting numbers will come after lunch with US data hitting us thick and fast.
 
We will get (deep breath) Retail sales – expected lower, Producer Prices – expected lower, the Empire State Manufacturing Index – expected lower, Capacity Utilisation – expected lower, Industrial Production – expected lower but not as poor as last month and the Michigan Consumer Sentiment index – expected higher. The Dollar has been bolstered by external factors this week but I suspect we will see some profit taking if all this data is as expected or worse.
 
I have just seen a snippet of an interview that Alan Rickman did with the BBC alongside Kate Winslet last year and Alan Rickman smiled. I suddenly realised it was the first time I can remember seeing him smile. He was the quintessential intelligent baddie and the best on screen Sheriff of Nottingham ever. It is so very sad to hear of his death.
 

Presents 

A small boy asked his mum if he could give his uncle the present their mum had bought for him. So they arrived at his house and Tommy went in without mum but with the wrapped box. He handed it to the uncle who was very excited. Then he noticed there was a damp patch on the corner of the box. Thinking it must be some kind of booze that had leaked, he dabbed the damp patch and tasted it.
"Is it Cider?" he asked.
Tommy giggled and said "Nope."
He tried again. "Is it wine?"
"No", said the excited and laughing boy. Unable to contain himself, he blurted out, "It's a puppy."
 
FX Research by David Johnson
Daily Currency Analysis with Michael Condron