US Labour Market Data Eyed
In line with market estimates, the BoE kept its interest rates unchanged at its policy meeting yesterday. The just released data indicates that trade deficit in the UK broadened more than expected for December. Sterling investors showed little reaction to today’s data. For the week ahead, macro updates, including the NIESR GDP forecast and the BoE’s quarterly inflation report, will be keenly watched.
Across the Atlantic, the official labour market release is likely to attract significant attention among investors in the latter half of today’s trading session. The report is expected to show that hiring pace in the US remained steady for January and wage growth picked up pace last month.
Pound Sterling – UK Markets
Sterling has shown little reaction to the data just released which revealed that trade deficit in the UK widened for December, as weak demand among European countries weighed on British exports and offset the impact of low oil prices. With no other notable domestic macro triggers today, the official US labour market report will attract considerable attention among investors in the Pound-US Dollar pair.
Yesterday, the Halifax survey showed that house prices in the UK rose more than anticipated for the three months ended January, especially after registering an easing trend for the fifth consecutive time last month. Considering that domestic real earnings is showing signs of improvement, favourable reforms in stamp duty and easing mortgage rates in the UK are likely to keep activity in the nation’s housing market activity buoyed for the near term. Separately, the BoE in its policy meeting kept its key interest rate unchanged at 0.5% and maintained its asset purchase facility at £375billion. The minutes of this meeting will be scrutinised to gauge the timing of an interest rate rise in the UK, particularly after no official favoured an immediate rate rise last month.
US Dollar – US Markets
The US Dollar is trading in a tight range against the majors ahead of today’s labour market data. The report is anticipated to show that non-farm payrolls in the US continued to increase at a stable pace for January. Although a downside surprise in today’s numbers cannot be ruled out, especially after recent indicators have hinted towards a slowing pace of hiring in the US energy sector on the back of falling global oil prices. Additionally, today’s report is expected to show that US wage earnings growth picked up for January, thereby easing disinflationary concerns in the country.
The US Dollar lost ground against most of its major peers yesterday. Data released in the US revealed that trade deficit widened unexpectedly for December, amid a surge in overall imports, despite low global oil prices keeping the nation’s import bill under check. Meanwhile, the weekly jobless claims survey revealed that the number of first time jobless claimants rose less than expected for the prior week.
Euro – European Markets
The Euro gained ground against the greenback yesterday following the release of the upbeat German factory orders data which showed that demand among manufacturers grew at a robust pace for December. Additionally, the Euro remained supported after the European Commission in its latest survey upgraded Euro zone’s growth forecast to 1.3% from 1.1% for 2015 and to 1.9% from 1.7% for 2016. Optimism over the region’s upbeat growth estimates was mainly backed by the recent drop in global oil prices, a declining Euro and the ECB’s recently announced quantitative easing measures.
Data just out revealed that German industrial production rose less than expected for December, thereby offering further evidence that activity in the domestic market is not gaining momentum as expected. Going forward, market participants will keep a tab on next week’s preliminary GDP report in France, Germany and the Euro zone, to gauge the region’s macro health for the last quarter of 2014. Growth in the bloc is expected to be moderate and investors will be keen to see how these economies coped with the slowdown in the last quarter.
Other Currencies – Highlights
In yesterday’s trading session, the Canadian Dollar gained ground against the greenback following the release of the upbeat trade report in Canada. The print showed that trade deficit in Canada widened less than expected for December, amid an unexpected increase in exports. Although weak global oil prices continued to weigh on the nation’s energy exports, a weaker Canadian Dollar along with an improvement in US economic activity boosted non-energy exports from Canada. Later today, Canada’s labour market report is likely to attract considerable attention among investors to gauge the health of the economy, particularly after the Bank of Canada recently lowered its key interest rate by 25 basis points. Additionally, with jobs market data scheduled in the US today, the US Dollar-Canadian Dollar pair is likely to witness some volatility in the latter half of the trading session.
Going forward, market participants will keep a tab on next week’s housing starts numbers in Canada for further direction to risk appetite.