Carney’s Speech Keenly Awaited
It was revealed today that retail sales in the UK grew more than expected for December. However, attention among investors is likely to remain focused on the BoE Chief’s speech today. Considering the dovish tone in the minutes of the most recent policy meeting and with new stimulus measures introduced in the Euro zone yesterday, his speech will be scrutinised to gauge the future course of monetary policy in the UK.
The preliminary PMI reports released earlier today showed that the pace of manufacturing and services activity in the Euro zone improved for January. Across the Atlantic, investors eye the Markit flash manufacturing PMI readings later today to gauge the resilience of the economy to the current subdued global conditions.
Pound Sterling – UK Markets
Data just out showed that retail sale in the UK grew more than anticipated for December. Market expectations were for a fall from the previous month amid concerns that intense competition in domestic market weighed on retail prices. Moving ahead, traders will eye today’s speech by the BoE Governor especially after the minutes of the latest policy meeting showed that all policymakers unexpectedly voted for keeping interest rates unchanged. With this publication strengthening expectations of a delay in the timing of an interest rate rise in the UK, his comments today will attract significant attention.
The Pound lost ground against the greenback yesterday following the ECB’s monetary easing announcement. Meanwhile, data released in the UK yesterday revealed an unexpected increase in the nation’s government debt for December. Considering the British Chancellor’s recent efforts to curb government spending along with a general election in the UK scheduled later this year, yesterday’s downbeat report is likely to have stoke some concern among investors.
US Dollar – US Markets
The greenback extended its yesterday’s gains against the Euro ahead of today’s preliminary Markit manufacturing PMI report in the US. This report is expected to show an improvement in manufacturing activity for January, after showing an ease in the pace of domestic activity for the past four months. This print will be further scrutinised to ascertain whether the US economy has maintained its resilience despite subdued global macro conditions and weakness in the energy sector during recent months. Going forward, traders will keep a tab on the US Fed’s policy meeting next week to for hints related to timing of an interest rate rise in the nation.
Yesterday, the US Dollar gained major ground against its key peers after the ECB launched an aggressive bond purchase programme in the Euro bloc. Meanwhile, data released in the US showed that initial jobless claims in the nation dropped less than expected for the previous week. However, investors remain uncertain whether the recent weakness in jobless claims updates is seasonal or if the momentum in the US jobs market is easing.
Euro – European Markets
The ECB’s decision to launch a quantitative easing program in the common currency bloc caused the Euro to slide below the 1.13 mark against the US Dollar and drop to an eleven year low. This programme would enable the ECB to buy government bonds, debt securities issued by European institutions and private sector bonds at a rate of €60 billion every month from March till September next year. However, the ECB President, Mario Draghi, stated that the duration of the stimulus programme might be extended if inflation fails to reach close to the central bank’s mandate. He further hinted that European nations must take this opportunity and implement necessary reforms to boost growth in the region. Meanwhile, at the ECB’s policy meeting, officials decided to keep the key interest rate unchanged, in line with market estimates.
The Euro fell below the 1.13 mark against the US Dollar. Data released earlier today showed that the preliminary manufacturing and services PMI readings in the Euro zone improved for January.
Other Currencies – Highlights
The Canadian Dollar lost ground against the greenback in yesterday’s trading session. This follows the earlier setback to the currency after the Bank of Canada’s unexpected decision to cut interest rates caused the Canadian Dollar to fall to near its multi-year lows against the greenback. The BoC Governor, Stephen Poloz, indicated that this move was taken to minimise the impact of cheaper oil prices on the Canadian economy. However, this unexpected decision by the BoC has strengthened concerns among investors that low interest rates might boost the already increasing indebtedness in the nation’s housing market.
Going forward, investors will eye the consumer prices inflation in Canada which is expected to show an ease for December. Meanwhile, the core inflation reading is anticipated to rise. Any unexpected downside surprise in the core inflation reading is likely to raise concerns among investors in the Canadian Dollar.