Pound Steady Despite Construction Sector Concerns
Sterling remained stable against the US Dollar and strengthened against the Euro in a day with no significant economic data releases coming from Britain. According to a report by the Financial Times, the government is monitoring Interserve’s activities, with concern for the construction company’s financial condition. Interserve’s shares tumbled in early morning trading, while the company noted in a statement that its operating profits could actually beat City forecasts.
The European Union Bill will be put to vote through parliament’s lower house sometime in the evening. Tories’ Party Chairman Brandon Lewis called MPs to back the Brexit legislation. The President of the European Commission, Jean-Claude Juncker, urged the UK to stay in the EU and said that he would be happy if Brexit was reversed. In the Eurozone, inflation in December stood at 1.4% as had been anticipated by economists.
Pound Sterling – UK Markets
Today, the Pound retained its value against the US Dollar with the exchange rate set at $1.37. Sterling edged up against the Euro with the exchange rate set at €1.12. No significant economic data releases are expected today from the UK.
An Institute for Fiscal Studies (IFS) report showed that 25% of the UK’s lowest-income households are struggling with debt. The Bank of England (BoE) has expressed its concerns about the rapid build-up of credit as more than £200bn is owed on credit cards and other unsecured loan agreements. However, the Institute for Fiscal Studies report noted that 60% of unsecured debt is held by households with above-average incomes.
An article in the Financial Times said that the UK government has set up a team of experts to monitor Interserve, which is one of the major contractors in Britain and a member of the FTSE 250 Index. According to the report, the government is concerned over the financial health of the company which employs 80,000 staff worldwide and has an annual turnover of £3bn. Interserve’s share price fell by 15% at today’s stock market opening.
US Dollar – US Markets
The US Dollar surged against the Euro with the exchange rate set at €0.81. The US Dollar Index (DXY) was pushed higher, coming in at 90.64 after hitting a three-year low yesterday. Three members of the Fed’s board are expected to deliver speeches today and the Beige Book, a report on economic conditions, is to be published later in the evening.
US government funding is set to expire on Friday night and Republican leaders are doing whatever they can to extend it until 16th February, giving a short-term relief to Donald Trump’s administration. Bloomberg sources said that Republicans are even willing to reauthorise the Children’s Health Insurance Program in order to satisfy the Democrats. The Congress has already passed three short-term funding bills since 1st October.
Bitcoin’s value continued to drop, trading under the $11,000 mark. According to a CNBC report, more than $200bn was wiped off the value of global cryptocurrencies at the peak of the recent sell-off. Prices of major cryptocurrencies such as Ethereum and Ripple fell sharply with the total market cap dropping to a low of $450bn. The sell-off was triggered by fears over tighter regulations in China and South Korea.
Euro – European Markets
The Euro continued dropping against the US Dollar with the exchange rate set at $1.22. The most important data release coming from Europe today is the inflation figures for December.
According to the Eurostat’s survey, Eurozone’s inflation in December stood at 1.4%, on an annualised basis. The figure was in line with analysts’ expectations. Core inflation was a nice surprise for European Central Bank (ECB) officials as it ticked up, reaching 1.1%, on a year-to-year basis, in the last month of 2016. The ECB’s target is to keep inflation close to 2%, but the economic growth and the reduced unemployment have not yet caused faster price growth.
Vitor Constancio, the ECB’s Portuguese Vice President, said that the current monetary policy will remain “very accommodating” for a long time. Constancio noted that he hasn’t heard convincing arguments in favour of transforming the European Stability Mechanism (ESM) into a European Monetary Fund. The ECB’s Vice President added that he would keep the ESM as it is because he sees no reason to modify an institutional situation by creating a new entity.
Other Currencies – Highlights
Sterling dipped against the Australian Dollar, trading at 1.73 AUD. A Westpac survey published today revealed that the consumer sentiment index rose by 1.8% in January. Westpac’s economists said that “sentiment has continued to recover from the weakness seen in the September quarter last year.” They also noted that this was the most positive start to a calendar year since 2010.
The Pound strengthened against the New Zealand Dollar, trading at 1.89 NZD. ANZ’s Commodity Price Index fell by 2.2% in December, adding to the 0.9% fall recorded in November. Dairy prices declined by 5.6%, on a month-to-month basis, while non-dairy components’ prices slipped by 0.4% in the last month of 2017. ANZ analysts said that combined with the surge in oil prices, such dynamics will temper the country’s terms of trade outlook over the first half of 2018.
Sterling edged up against the Swiss Franc, trading at 1.32 CHF. A Bloomberg survey showed that economists expect the Swiss National Bank (SNB) to raise its interest rates in the fourth quarter of 2019.