Yahoo Finance UK Retail Sales to Drive Sterling, with the USD in the Hands of the Senate
Earlier in the Day:
Economic data released through the Asian session this morning was limited to New Zealand’s December Business PMI, which slipped from 57.7 to 51.2, taking the Kiwi Dollar down from $0.73061 to $0.72899 upon release of the numbers, before recovering to $0.7298 at the time of writing.
The December PMI was the lowest since December 2012, while the manufacturing sector has been in expansion since October 2012. The sub-index numbers were also disappointing, with all of the sub-indexes softening in December.
New orders fell from 57.3 to 50.2, employment index fell from 54.1 to 51.3 with production falling from 61.7 to 53.3.
While the weaker numbers were attributed to the NZ General Election outcome and delay in the formation of government, the softer level of new orders will likely be a drag in the January figures, though any sign of a pickup in demand and employment in January and the market will likely be comfortable with another soft overall PMI number.
Across the other Asian majors, it was a positive start to the day, with the Aussie Dollar up 0.16% to $0.8014 and the Yen up 0.19% to ¥110.90 against the Dollar, with concerns of a possible U.S Federal Government shutdown on Sunday seeing the Dollar pull back from its mid-week gains.
In the equity markets, the ASX200 continued to buck the trend, ending the day down 0.15%, while the Nikkei gained 0.13%, with the CSI300 and Hang Seng up 0.65% and 0.23% respectively at the time of writing, with an uptick in yields doing little damage to risk appetite through the session
The Day Ahead:
Economic data out of the Eurozone is limited to Germany’s wholesale inflation figures for December, which are forecasted to be EUR positive, though the stats are unlikely to have a material impact on the EUR through the day, with the markets likely to be more focused on Merkel’s efforts to push through an agreement to form the grand coalition.
With the EUR at $1.22 levels and the ECB’s January monetary policy decision and press conference just around the corner, some questions may be raised on current levels, which could see the EUR begin to move back towards $1.20, though the Senate will need to avert a government shutdown this weekend for such a trend to kick in.
At the time of writing, the EUR was up 0.17% to $1.2259, with market risk appetite and politics likely to be the key drivers through the day.
It’s a big day for the Pound today, with the UK’s December retail sales figures scheduled for release later this morning. The Pound has been largely untouched from a data perspective, leaving positive sentiment towards Brexit to drive the Pound back to $1.39 levels, the highest since the EU Referendum.
The bad news for the Pound is that the figures are forecasted to be Sterling negative and, with 4th quarter GDP estimates out next week, the numbers will need to be upbeat to support current levels.
Any dip on the numbers will likely be short-term however, with Brexit and the continued overshooting of inflation over the BoE’s 2% target the key considerations for the Pound for now.
At the time of writing, the Pound was up 0.08% to $1.3905, with the House of Lords vote on the EU Withdrawal Bill, Brexit chatter and today’s stats the key drivers through the day.
Across the Pond, key stats out of the U.S are limited to preliminary consumer sentiment figures for January. Forecasts are for the Michigan Consumer Sentiment Index to recover from December’s softer numbers, with the tax reform bill and continued tightening in labour market conditions providing support.
For the Dollar, market focus will be on the Senate however, with any signs of a Federal Government shutdown likely to weigh heavily on the Dollar ahead of the close. At the time of writing, the Dollar Spot Index was down 0.13% to 90.37.
For the Loonie, economic data includes November’s manufacturing sales figures, which are forecasted to be Loonie positive, though there will be some caution ahead of next week’s NAFTA talks, with the BoC’s dovish rate hike still there for the markets to consider.
At the time of writing, the U.S Dollar was up 0.01% to $1.2419 against the Canadian Dollar, with sentiment towards NAFTA and whether the U.S will in fact pull out being the key driver ahead of talks.
This article was originally posted on FX Empire
