UK CPI Data Anticipated
A light global macroeconomic calendar today is likely to keep traders on the side-lines today. Sterling investors will keep a tab on tomorrow’s consumer price inflation report in the UK which is anticipated to show an easing trend for December and bring the nation’s annual inflation rate below 1%.
Across the Atlantic, traders will keep a tab on today’s speech by the Atlanta Fed President to gauge any impact of Friday’s mixed labour market report on the central bank’s view towards the timing of an interest rate rise in the US. Meanwhile, investors in the Euro zone will keep a tab on the European Court of Justice’s ruling this week to verify if the court’s decision favours the ECB’s plans to implement a quantitative easing programme.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing against the majors this morning ahead of tomorrow’s crucial inflation report, which is expected to show a second consecutive ease for December. This print will attract considerable attention among investors, especially after recent BoE publications have stoked concerns that inflation is likely to ease going forward. However, prospects of an upside surprise in tomorrow’s inflation data cannot be ruled out, particularly amid signs of a pickup in domestic earnings.
On Friday, Sterling capitalised on the greenback’s losses after data released in the US showed an unexpected fall in the nation’s wage rate for December. In the UK, a report revealed that factory output for November increased at its strongest pace since February 2014. However, investors showed little reaction to this report after it further indicated that the nation’s industrial production contracted unexpectedly for November, following a sharp drop in output of oil and gas. Separately, the NIESR’s economic growth survey estimated that Britain’s recovery slowed for the last quarter of 2014.
US Dollar – US Markets
December’s upbeat nonfarm payrolls data led the greenback higher against its major peers in Friday’s trading session. The report showed that hiring pace in the US remained firmly above the 200K mark for a fourth straight month, amid robust growth in employment across the construction and manufacturing sectors last month. However, gains in the US Dollar were short-lived after the print further revealed an unexpected drop in the nation’s labour market participation rate and indicated that wages in the US dropped unexpectedly last month, for the first time since August 2012. The latter has raised additional concerns, especially after the most recent FOMC minutes hinted that the US Fed will start raising its interest rate this year once it is confident that inflation will nudge higher going forward. Market participants will keep a tab on today’s speech by a voting FOMC member, Dennis Lockhart, to gauge if Friday’s mixed jobs data has impacted the central bank’s policy plans for this year.
Meanwhile, with a light domestic economic calendar today, the US Dollar is trading in a tight range against the majors this morning.
Euro – European Markets
With little on the domestic macroeconomic front, the Euro is trading in a tight range against the Pound this morning. Going forward, traders will eye the European Court of Justice’s (ECJ) decision, later this week, on the legality of the ECB’s Outright Monetary Transactions which is expected to have a key bearing on the structure of any future sovereign bond purchase programme of the ECB. After recent data suggested that Euro zone’s inflation swung into negative territory, investor speculation that the ECB might announce a quantitative easing programme in its upcoming policy meeting has gained strength. However, with ambiguity over the ECJ’s ruling, there is still a lot of uncertainty among investors over the ECB’s likely policy measures. The common currency is also expected to remain under pressure due to the uncertainty surrounding the snap elections scheduled in Greece later this month, which might bring the opposition Syriza Party into power.
On Friday, the Euro traded on a firmer footing against the greenback despite German data for November showing a contraction in the nation’s industrial production and trade surplus.
Other Currencies – Highlights
The Canadian Dollar lost ground against the greenback in Friday’s trading session following the release of soft Canadian macro updates. The domestic labour market report revealed that the number of employed people in Canada reduced unexpectedly for December, registering the second consecutive fall. The report further indicated that participation in Canada’s labour market eased surprisingly, however, the country’s unemployment rate remained unchanged for December. Additionally, other surveys showed that housing starts in Canada rose at a slower than expected pace for December and building permits fell unexpectedly for November which further weighed on the Canadian Dollar against the majors.
With little on the domestic macroeconomic front, the Canadian Dollar is trading on a weaker footing against the greenback this morning. Moving ahead, with crucial retail sales and inflation data scheduled in the US later this week, the Canadian Dollar is likely to witness some volatility.