Light Global Economic Calendar Day
Global economic news is off to a slow start this week. In Europe, the just published Sentix survey results confirmed that investor sentiment has deteriorated in the Euro zone, with the indicator falling below market expectations for February. This data was released ahead of a slew of economic releases including GDP estimates across the Euro bloc, scheduled in the coming days, which are likely to set the tone for macro expectations.Across the Atlantic, the Federal Reserve’s (Fed) take on the US job market with the help of the labour market conditions index, due for release later today, will provide more insights after Friday’s report on payrolls. Meanwhile, markets look forward to key UK economic reports scheduled from tomorrow amid a data empty UK docket today.
Pound Sterling – UK Markets
On Friday, the Pound gave up earlier gains and slipped below the 1.45 mark against the US Dollar, this was after stronger than expected US average hourly wage earnings data added to hopes that the Fed will increase rates at some point this year. Also, Sterling has been facing further downward pressure following the publication of a dovish inflation report by the Bank of England (BoE) in the previous week, wherein the UK central bank’s economic growth forecasts for the year were revised and lowered. Meanwhile, the lone BoE dissenter, Ian McCafferty, unexpectedly dropped his call for an immediate rate rise. Moreover, global economic growth concerns and uncertainty surrounding the EU referendum signal a likely delay in any normalisation of lending rates by the BoE.
This week’s UK economic data releases will only commence from tomorrow, starting with trade deficit data which is anticipated to show a slight improvement for December. Later in the week, traders’ attention will turn towards domestic manufacturing production for December, after posting two straight declines in the previous monthly updates.
US Dollar – US Markets
Last week’s update on the US labour market for January likely quelled market fears about the economy’s growth prospects. The headline number for new job creations in the US economy came in well below expectations for January, reflecting a shaky start to non-farm payrolls growth this year. But an unexpected drop in the unemployment rate and stronger than anticipated wage growth data pushed the greenback higher across the board. The data was enough to suggest that the Fed might continue to tighten monetary policy in the months ahead. Meanwhile, financial market turmoil at the start of this year and mounting concerns about growth in the global economy could weigh on expectations for more interest rate rises this year.
Moving ahead, market participants will now look forward to the Fed Chairperson, Janet Yellen’s testimony to Congress this week for further evidence about the central bank’s future course of action. On the macroeconomic data front, today’s numbers for the Fed’s broad measure of labour market conditions will provide further insight to the job market trend in recent months.
Euro – European Markets
This morning, the shared currency is seen gradually recovering from its losses against the US Dollar following the recent upbeat US employment data. Also, with Chinese markets closed this week due to the celebrations of the New Year and a light docket in the Euro area, trading in the Euro against the major currencies is subdued. Markets will continue to monitor global macro news and sentiment in the market for further direction in the Euro currency in the session ahead.
In economic news, the Euro zone Sentix Investor Confidence survey results suggests that sentiment in the 19-nation currency union has deteriorated again. Sentix today reported that the general measure of investor sentiment in the Euro region declined more than market estimates for February, adding to evidence that the economy has stumbled into a soft patch again in the New Year. Today’s update has probably reaffirmed the European Commission’s 2016 growth forecast, which was lowered to 1.7% from 1.8% in the previous week.
Other Currencies – Highlights
The Canadian Dollar partly rebounded and is currently trading higher against the greenback. On Friday, the release of Canadian payrolls data around the same time as the US employment report had negatively impacted the Canadian currency. The local data was not as impressive as the US equivalent and the Canadian Dollar lost its footing against the US Dollar as a result. Data had showed that Canada’s unemployment rate unexpectedly edged up in January and overall employment fell in the previous month, disappointing expectations of an increase in job growth. On a brighter note, Canada’s full-time employment rose in January.
However, today the Canadian Dollar has erased most of its losses and is trading firmer against the US Dollar buoyed by improved global market sentiment at the start of the week and a slight rebound in crude oil prices. In the session ahead, housing starts and building permits data in Canada along with the Bank of Canada’s governing council member, Timothy Lane’s speech will be closely monitored.