The Pound Improves with May’s Brexit Speech
After spending 6 months at Downing Street, British Prime Minister, Theresa May has finally provided some clarity about her Brexit wish list. Although she continues to hold her negotiating cards quite close to her chest, she’s unveiled some of the details that the market has craved since the June vote. Ms. May managed to soothe financial markets by stating that Brexit would be voted on by both houses of the Parliament and that she would avoid a “cliff-edge” scenario. The speech immediately raised the Pound’s value across the board.
The global economic calendar overflows with economic releases today. In the UK, the just out data showed that Britain’s jobless rate held steady during the three months ended November. Meanwhile, German consumer prices sharply accelerated in December. Later today in the US, the Federal Reserve’s (Fed) Beige book and the Fed Chairwoman, Janet Yellen’s speech will grab attention.
Pound Sterling – UK Markets
The Pound is trading on weaker footing against the US Dollar this morning. The just out data indicated that the ILO unemployment rate remained steady at a 11-year low of 4.8% in the three months ended November. Further, the number of employed people slid during the same period. Moreover, the nation’s wage growth accelerated more than expected during the three months to November.
Yesterday, Sterling strengthened against the greenback, after UK’s Prime Minister, Theresa May surprisingly announced that the Brexit deal will be put for a final vote in the Parliament. The rise in Sterling was also helped by a weaker US Dollar as newly-elected President, Donald Trump talked down the greenback calling it “too strong” against the Chinese Yuan. The British PM, in her most awaited speech outlining her 12-point plan, describing the plan for a clean break from the European Union’s single market. On the economic front, UK’s inflation growth accelerated in December to its highest rate since July 2014, amid higher air fares and food costs.
US Dollar – US Markets
The greenback has taken a breather from yesterday’s steep fall and is trading higher against its major peers this morning. On the macroeconomic front, the US consumer inflation and industrial production data for December will command market attention today. In addition to this, the Fed Chairwoman, Janet Yellen's speech as well as the Fed’s Beige Book report is scheduled later in the day. Moreover, weekly mortgage applications data will be eyed for further cues on the US Dollar.
The US President-elect Donald Trump’s comments on the US Dollar over the weekend sent the greenback sharply lower across the board. He stated that the nation’s domestic currency is ‘too strong’ especially in comparison to the Chinese Yuan. He further added that, due to this, US companies can’t compete with Chinese firms now, which will adversely impact the US economy. Separately, the US Empire State manufacturing index for January declined from an 8-month high reading recorded in the previous month.
Euro – European Markets
Yesterday the shared currency ended lower against Sterling, snapping its three-day winning streak. On the data front, the Eurozone’s ZEW economic sentiment index strengthened in January, recording its highest reading since December 2015. Meanwhile in Germany, economic sentiment improved to a
7-month high level in January. However, the increase fell short of analysts’ estimates. Further, German ZEW current situation index reached a five-year high level in January, easily surpassing expectations and suggesting an improved outlook for the nation’s economy.
Today on the economic release front, the Federal Statistical office of Germany indicated that final consumer price inflation in the Eurozone’s powerhouse economy quickened to its highest point since mid-2013 in December, remaining broadly in line with the preliminary data published earlier. Rising energy prices significantly influenced the inflation rate during the period. Going ahead, investors look forward to the Euro area’s final print of consumer prices data for December.
Other Currencies – Highlights
The Kiwi Dollar has reversed its previous session gains and is trading on a weaker footing against the US Dollar this morning. During the previous session, the recent Global Dairy Trade auction report indicated that dairy product prices rebounded after posting two straight declines in the previous two auctions. Additionally, data released earlier in the week showed that New Zealand’s business confidence rose during the fourth quarter of 2016, hitting its highest level since June 2014. Business confidence remained strong throughout all sectors with strongest sentiment seen in the construction sector. However, confidence fell in the companies’ own activity expectations. Meanwhile, the nation’s house sales volumes dropped on an annual basis in December.
Today, traders will keep an eye on New Zealand’s business performance of manufacturing index and building permits data for further direction in the Kiwi Dollar. There are no other major economic releases scheduled in New Zealand during the latter part of this week.