Sterling is at The Mercy of May’s Speech Today
The primary focus and biggest market mover today will be the British Prime Minister, Theresa May’s Brexit speech. In probably the most crucial speech of her career, Ms. May will lay out her vision for UK outside the European Union (EU). Expectations are growing that she will give “Hard Brexit” a new sense of reality and is expected to infuse a fresh bout of volatility in the forex market. On the economic front, the just released data showed that UK’s annual consumer price index surged to its highest level since July 2014, in December, buoyed by rising import costs.
Meanwhile, in the Eurozone, investors await the region’s ZEW survey data for January. Later in the day, the US Empire state manufacturing index would be looked upon for short term trading impetus. Separately, the International Monetary Fund (IMF) held its global growth forecasts for 2017 and 2018 unchanged.
Pound Sterling – UK Markets
The Pound is trading on a stronger footing against the US Dollar this morning, surpassing the crucial 1.21 mark, after the just out data from the UK indicated that growth in annual consumer prices accelerated in December, reaching its highest level since July 2014, as import costs surged amid a fall in Sterling. Today, market attention will be focused on UK Prime Minister, Theresa May’s speech, which will provide clarity over her 12-point plan regarding Britain’s official exit from the EU ahead of negotiation talks. Ms. May’s Brexit approach is widely expected to signal Britain’s exit from the EU’s single market and customs union in a bid to regain control of UK’s borders.
Yesterday, the Bank of England Governor, Mark Carney stated the central bank closely watched consumer spending amid rising signs of economic growth being dependent on it. Separately, the IMF upgraded UK's economic growth forecast for the current year, as Britain showed economic resilience in the aftermath of the historic Brexit vote.
US Dollar – US Markets
The US Dollar is trading weaker against its major counterparts this morning. Going ahead, market participants will focus on the Empire State manufacturing survey conducted by the Federal Reserve (Fed) Bank of New York to gauge business conditions for manufacturers in the New York City. Additionally, the New York Fed President, William Dudley’s speech, scheduled later in the day, will be eyed for further cues in the greenback. Tomorrow, dynamics in the US Dollar will be determined by the US consumer prices data for December, which is anticipated to register a rise from the previous month.
Yesterday, the IMF raised its forecast for the US economic growth over the next two years while predicting that the US President-elect Donald Trump's plans to boost infrastructure spending and his introduction of tax cuts in the nation are likely to spur a wave of growth. However, the IMF stressed that there remains uncertainty around what would materialise and that the extent of this could not be gauged immediately.
Euro – European Markets
The shared currency has reversed its previous session losses and is trading higher against the greenback this morning. Data released earlier in the session indicated that Italian trade surplus narrowed in November. Ahead in the day, the Eurozone and German ZEW economic sentiment survey data for January will be in focus with both the surveys expected to post an increase from the prior month. In addition to this, German current situation index for January will also attract market attention. Moving forward, currency traders will keep a close watch on the Eurozone and Germany’s consumer inflation data for December, slated to release tomorrow.
Yesterday, the Euro ended lower against its major peers. The IMF warned about the political environment in the Euro area, pointing to elections in Germany and France and the still undetermined terms of Britain’s exit from the EU. On the data front, the Eurozone’s seasonally adjusted trade surplus widened in November, as exports jumped, indicating a pickup in the region’s economic growth.
Other Currencies – Highlights
The Australian Dollar is trading on a stronger footing against the greenback this morning, hovering near the 0.75 handle, amid upbeat data releases from Australia’s property market. The Australian Bureau of Statistics indicated that home financing in Australia rebounded more than expected in November, highlighting resilience in the nation’s housing market. Additionally, investment lending on homes, a closely followed gauge of fixed residential property loans, also significantly advanced in November, compared to the previous month. Separately, in China, Australia’s key trading partner, annual foreign direct investment rose in December. Further, the IMF upgraded China’s economic growth forecast for this year, citing the presence of continued government stimulus. The world’s second largest economy ended 2016 on a strong note after a rocky start to the year.
Going forward today, Australia’s economic calendar features the release of the Westpac consumer confidence index. Further ahead this week, investors look forward to Australia’s labour market and consumer inflation expectations data.