Theresa May tells Davos UK will lead World on Free Trade
Speaking about Brexit at the Davos World Economic Forum, British Prime Minister Theresa May has said that the UK will be a “world leader” on trade after Brexit. Economic data from the UK showed that British house price growth slowed and the number of homes sold slightly fell in December. Later today in the US, focus remains on the US housing data, Philly Fed manufacturing gauge and weekly jobless claims for further momentum.
The European Central Bank (ECB) holds its first monetary policy meeting of 2017 today. As market participants widely expect the central bank to maintain status quo at this meeting, their focus will be on the ECB President, Mario Draghi’s press conference. The ECB Chief might adopt a far more neutral tone and is likely to walk a fine line today as the Governing Council is on course to narrow its asset purchases programme this year. On the data front, the Eurozone’s current account surplus widened in November.
Pound Sterling – UK Markets
The Pound is trading on a stronger footing against the greenback and the common currency this morning. Overnight data showed that UK’s housing price balance surprisingly eased in December, indicating signs of a slowdown in Britain’s housing market. The British economic calendar remains devoid of any other key data releases today. Further ahead, investors await tomorrow’s British retail sales data, which will close off the week and is expected to improve in December. Separately, the International Monetary Fund Chief, Christine Lagarde warned that the British economy will be “in pain”, once UK’s Prime Minister, Theresa May officially triggers Article 50 and as negotiation talks formally begin this year.
Yesterday, Britain received a fresh batch of economic data from the nation’s labour market. The ILO unemployment rate remained steady at 4.8% in the three months to November, staying at a 11-year low. Further, growth in wages accelerated more quickly than expected during the period, its fastest rise since September 2015. Meanwhile, the number of people claiming jobless benefits dropped in December.
US Dollar – US Markets
Yesterday, the greenback rebounded strongly across the board, triggered by the Fed Chairwoman, Janet Yellen’s hawkish remarks. She stated that the central bank officials expect interest rates to rise “a few times a year” through 2019. She also indicated that the US economy is close to full employment and that inflation is progressing towards the Fed’s target. Investor sentiment was also boosted by the Fed’s latest Beige Book report which showed that the US economy continued to expand at a modest pace across most regions through the end of last year. On the release front, the US annual consumer prices jumped above 2.0% for the first time in two and a half years for December, as Americans paid more for gasoline and rental accommodation. Meanwhile, industrial production rebounded at its fastest pace in more than two years in December, led by a rise in utilities output.
Today, market participants await the release of weekly jobless claims and the Philadelphia Fed manufacturing index along with the US housing sector data.
Euro – European Markets
This morning, the shared currency is trading higher against its American peer, after data released earlier in the session showed that the Eurozone’s seasonally adjusted current account surplus widened in November. Ahead in the day, investors await the ECB’s interest rate decision. After extending its bond purchase deadline in December, the central bank is widely expected to hold its monetary policy steady at its first meeting this year. Moreover, market participants will keep a close watch on the ECB President, Mario Draghi’s speech, at the central bank’s press conference which will be held shortly after the meeting.
Yesterday, the final reading of the Euro zone’s consumer prices was confirmed at a 38-month high level, in line with preliminary estimate for December. Higher energy prices accounted for much of the rise in inflation. The news of inflation building up in the common currency region helped the Euro to end higher against the Pound. Meanwhile, preliminary print from the Eurostat indicated that the Euro area’s seasonally adjusted construction output climbed for the second straight month in November.
Other Currencies – Highlights
The Canadian Dollar is trading lower against its US counterpart this morning. In a widely-expected move, the Bank of Canada (BoC) kept overnight interest rate unchanged at 0.50% in its first interest rate decision for 2017. Further, the BoC Governor, Stephen Poloz, left the door open for a potential rate cut to the central bank’s benchmark interest rate, after issuing a warning that the Canadian economy will face "material consequences" under the newly elected US President, Donald Trump’s protectionist policies. Meanwhile, the BoC expects Canada’s real GDP to advance by 2.1% in the current and next year.
Today, Canada’s manufacturing shipments data is scheduled to release and will likely rebound in November. Going ahead, market participants will shift focus to tomorrow’s economic data docket featuring the release of Canada’s retail sales and consumer price index for further direction. While the nation’s consumer prices are expected to advance for December, retail sales are likely to record a slower growth in November.