Yahoo Finance UK Economic Data brings the GBP into Focus, with an Eye on the USD
Earlier in the Day:
Economic data released through the Asian this morning was limited to December inflation figures out of China, which failed to provide the markets with any direction, which was perhaps a bad thing when looking at the mixed risk sentiment through the session.
The Japanese Yen saw one of the biggest moves this morning, rising 0.26% to ¥112.37 at the time of writing, which led to the Nikkei’s 0.2% fall for the day. The Yen continued to garner attention following the shift in monetary policy on Tuesday and, while Japanese bank stocks have seen renewed interest, Japanese export stocks have struggled this morning.
While the Yen was on the up, the Aussie Dollar was on the decline, down 0.08% to $0.7818 at the time of writing, with a bounce in U.S Treasury yields narrowing yield differentials, a stronger U.S. Dollar likely to be particularly welcomed by the RBA, which has been concerned over the likely negative effects of a stronger Aussie Dollar for some time. A lack of data through the week has left the Aussie Dollar on the defensive this week, though things will change with December retail sales figures scheduled for release in the early hours of tomorrow.
Concerns over household debt outpacing wage growth has left the markets neutral on policy over the near-term and, if tomorrow’s figures disappoint, we will likely see the Aussie Dollar begin to make a move back towards $0.76 levels.
For the Asian equity markets, it wasn’t all doom and gloom this morning, with the CSI300 and Hang Seng gaining 0.20% and 0.39% respectively, while the ASX200 slid 0.64% with mining and resource stocks and the Big-4 banks weighing on the ASX200 through the session.
The Day Ahead:
It’s a quiet day for the EUR today, with no material stats scheduled for release out of the Eurozone. The recent gains in the U.S Dollar will be warmly received by the ECB and European multinationals, with the upside in the EUR having pegged back European equities for some time.
The markets will be looking ahead to the ECB monetary policy meeting minutes that are scheduled for release tomorrow, though for now it’s all for the Dollar to lose.
At the time of writing, the EUR was down 0.09% to $1.1926, with even yesterday’s positive trade and industrial production figures out of Germany not good enough to stem the tide.
While it’s a quiet day for the EUR, it’s a particularly busy day for the Pound. Macroeconomic data out of the UK this morning includes December’s manufacturing and industrial production figures, trade data and the NIESR GDP Estimate. Focus will be on the trade and manufacturing production figures and, while Brexit remains the key driver for the Pound, we will expect the markets to respond to today’s figures.
The IMF recently downgraded its economic growth forecast for this year and next, citing Brexit as a key contributor to the decline. The revisions came at a time when economists began to admit that they had been overly pessimistic with regards to the likely impact of Brexit and run up to Brexit, on the UK economy.
How the economy performs through to the end of December will be of particularly importance from a monetary policy perspective, with the BoE eager to address the current inflation overshoot that is perhaps the biggest near-term risk to the economy.
At the time of writing, the Pound was down 0.19% to $1.3514, with the early part of the day fall coming of the back of renewed appetite for the U.S Dollar.
Across the Pond, stats are limited to December import and export price indexes, which are unlikely to have a material impact on the Dollar, with the markets looking ahead to Friday’s inflation and retail sales figures.
At the time of writing, the Dollar Spot Index was flat at 92.529, with the Dollar having recovered from an intraday low 92.398. While the data is on the lighter side, FOMC voting member Evans is scheduled to speak this afternoon, which would influence if there’s any policy talk. Evans has been particularly dovish at the turn of the year, so it would need a shift in outlook towards rates for the Dollar to respond, with FOMC member Bullard also due to speak this evening, though as a non-voting member, will have less impact.
This article was originally posted on FX Empire
