Onus back on the effects of US snow

 

US data remains negatively affected by polar vortex European retail sales to show a poor Christmas for EZ shopping
UK homebuilding at strongest in over a decade Services PMIs and ISMs due alongside ADP jobs.

 

Currency markets find themselves in a bit of a holding pattern as we open up Europe this morning. Traders were non-plussed by yesterday’s lull in proceedings but will surely get back on the horse today as important services data kicks off an important 3 day period on the data front.

Following Monday’s dismal non-manufacturing ISM release, eyes will most certainly be fixed on the services measure due this afternoon at 3pm. The market is once again expecting a tick higher however, something that could easily be disappointed once again. Services data is also due from the Eurozone and the UK throughout the morning with little weather related peril expected there.

Weather was not a factor as GBP drove higher on the session following January’s construction PMI announcement. The fortunes of the construction sector continued to improve with January’s housing activity increasing at the fastest rate in over a decade. Residential, commercial and civil engineering projects are all growing at multi-year record rates and this increased confidence is leading to a marked improvement in sector employment. The current trend of employment is the most positive since 2008. Lead times from suppliers have been highlighted as a concern moving forward; suppliers cannot fill demand as quickly as they get it, which could lead to a rise in costs. For now we will look at it as a natural break on output.

Sterling does remain lower on the week however following the slight slip in manufacturing on Monday. There is the likelihood that tomorrow’s Bank of England meeting could cause some to bet on a dovish statement to the Bank’s inevitable policy hold. We still maintain that the majority of any change to forward guidance will be made at this month’s Quarterly Inflation Report and not tomorrow, but a reiteration that changes are likely to be made could see sterling selling.

Tomorrow’s ECB meeting, and the prospect of a slither-like cut in interest rates, has kept the euro from getting to feisty this week. I doubt that we will see any change from the bank this week but further deflationary pressures will see some movement next month in all likelihood. Today’s retail sales numbers are expected to be poor, showing that the European retail sector failed to enjoy its Christmas. Sales are expected to fall by 0.7% on the month.

Away from the prospects for the service sector, the much-maligned ADP jobs number from the US will be closely watched. The euphoria of last month’s 238,000 number, a 13 month high, was swiftly loss in the horror of the following Friday’s poor payrolls number. This month’s figure, likely weather affected, may be usurped by any revision to that 238,000 increase; which number was correct? We expect similar motives on Friday during the payrolls report. ADP is due at 13.15 GMT.

Our central bank webinar is this Thursday at 2pm GMT, you can register here.

Have a great day.

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Indicative Rates

Sell

Buy

GBPEUR 1.2061 1.2081
GBPUSD 1.6305 1.6325
EURUSD 1.3507 1.3528
GBPJPY 165.07 165.20
GBPAUD 1.8335 1.8360
GBPNZD 1.9867 1.9893
GBPCAD 1.8054 1.8078
NZDUSD 0.8199 0.8213
GBPZAR 18.11 18.16
USDZAR 11.107 11.133
GBPPLN 5.0630 5.0856
EURJPY 136.76 136.97
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Please note these rates are “interbank” rates i.e. they indicate where the market is currently trading and are not indicative of the rates offered by World First. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time.

Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as of the date of the briefing and are subject to change without notice. Any rates given are ‘interbank’ i.e. for amounts of £5million or more thus are not indicative of the rate offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.

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