UK’s Rightmove House Prices Rise in January
In a start to the new week, uncertainty continues to weigh on the global markets amid growing concerns of a slowdown in the major economies and weaker oil prices. On the macro front, data released earlier today showed that Britain's Rightmove house price index rose in January from December. In the US, it is a quiet day for economic news due to a bank holiday and the US Dollar appears to have recovered most of its losses against the major currencies incurred last week.
In Europe, as market participants have nothing new in terms of notable economic updates today, they will shift their focus towards the European Central Bank’s (ECB) policy meeting on Thursday. The central bank is expected to keep rates unchanged this week after increasing stimulus at the end of last year.
Pound Sterling – UK Markets
Since the start of 2016, the Pound has underperformed against most of its major currency parts amid expectations that the Bank of England (BoE) interest rate rise could be pushed back further in the light of soft UK economic data. Also, last week saw the Sterling – US Dollar currency pair extend its losses after European Union referendum concerns were flagged by the BoE policymakers.
This morning, the Pound has partly recovered from its earlier losses against the greenback. On the macro front, the latest house price balance data from tracking website Rightmove showed that house prices rose for the first time in 2016 after asking prices had declined in the previous two months. However, property prices only marginally rose at a time when activity in the market was typically slow. This data, however, had no influence on trading in the Pound against its key peers. Tomorrow, the Pound – US Dollar currency pair could experience significant volatility in response to UK’s inflation data. The BoE has refrained from increasing rates citing weak inflationary pressures, so the latest UK CPI data will attract major attention.
US Dollar – US Markets
The US Dollar traded broadly lower against most of the major currencies on Friday, as soft US economic reports dampened the appeal of the greenback. US retail sales growth was lower than expected in December as cheaper gasoline prices weighed on receipts at service stations and unseasonably warm weather cut demand for winter clothing. Also, US industrial production fell for the third consecutive month in December as lower commodity prices and unusually warm weather weighed on production in the mining and utilities sector. In addition, the New York Empire State manufacturing index fell sharply for January, recording the fastest drop since the 2007-09 recession. However, the University of Michigan’s preliminary index of consumer sentiment rose more than expected for January. Downbeat economic data in the US has fueled doubts about the Federal Reserve’s intention to raise the interest rates in its next policy meeting in March.
The greenback is trading lower against the Pound this morning, with no major economic releases due in the US. This is partly because US markets are closed for the Martin Luther King holiday.
Euro – European Markets
The Euro – US Dollar currency pair has surrendered most of its earlier gains this morning, after having surged well above the 1.09 mark on Friday. The main focus among investors this week will be a string of economic releases in Europe and the upcoming ECB meeting later this week. Although the policy settings in this week’s ECB monetary policy meeting are widely anticipated to remain unchanged, a dovish rhetoric post the meeting could weigh on the currency pair. In the statement and the press conference, the ECB might repeat its last week’s dovish message and discuss the near-term inflation outlook, given the recent slump in energy prices.
For today, the European docket is empty in terms of significant economic news. The Euro has today largely shrugged off the dampened global market sentiment and weaker oil prices. Looking ahead, Euro zone’s inflation data, due tomorrow, could trigger some volatility in the Euro against the majors. Expectations are for the region’s inflation rate to remain in negative territory for December, thus highlighting that the ECB’s measures are yet to show their effect on consumer prices.
Other Currencies – Highlights
Earlier today, the Japanese Yen gave up part of its gains against the US Dollar, but it hovered close to five month highs reached against the greenback in the prior week. The Bank of Japan (BoJ) published its quarterly report on economic conditions in Japan’s nine regions, with the central bank cutting its assessment for 1 of the 9 regions, while the rest of the regions continued to recover. In the previous meeting, the BoJ had left the assessments of all the nine regions unchanged, signalling that the economy was recovering. Also, earlier remarks made by the BoJ Governor that the Japanese economy will continue to moderately recover despite the recent turmoil in Tokyo stock markets, received little market attention.
In economic news, data showed that industrial production in Japan declined in November after showing signs of improvement in the previous two consecutive months. The decrease was likely due to sluggish domestic demand and a slowdown in China, Japan’s major trading partner. Additionally, the nation’s tertiary industry index fell more than expected for November.