British Sterling looking to a hawkish BoE
An overall upbeat economic data coupled with the fact that the BoE expects the current drag in inflation to be temporary has given rise to a potential hawkish BoE statement in the near future. The Sterling has managed to gain against its weaker peers in this aspect with the exception of the Cable. While in reality the BoE might maintain a neutral tone, the fact that there were no downside risks to the GDP an uptick in the labor market all point to a possible rate hike sometime this year with the rhetoric likely to pick up after the May elections.
- CBI realized sales 1 vs. 42
- BBA Mortgage approvals 36.4k vs. 36.2k
- UK Second estimate GDP q/q 0.5% unchanged
- Preliminary business investment q/q -1.4% vs. 2%
- Index of services 3m/3m 0.8% vs. 0.7%
Euro seeking direction as Greece negotiations took center stage
The Euro was largely mixed this week as economic data was shrugged off and the single currency focused on the Greece debt negotiations. The parties involved managed to buy some time with an extension by 4 months but the fact that the issue at hand was not resolved continues to weigh in on the Euro. Economic data released this week showed that CPI in the Eurozone was stable at 0.6% on the core, while overall data, more or less was relatively stable.
- German Ifo business climate 106.8 vs. 107.4
- German final GDP q/q 0.7% unchanged
- Eurozone Final CPI y/y -0.6% unchanged; Final core CPI y/y 0.6% unchanged
- Gfk German consumer climate 9.7 vs. 9.6
- Italy retail sales m/m -0.2% vs. 0%
- German import prices -0.8% vs. -0.8%
- German preliminary CPI m/m 0.9% vs. 0.6%
- Spain Flash CPI y/y -1.1% vs. -1.5%
- Italy preliminary CPI m/m 0.3% vs. 0.2%
BoC rate cut unlikely in March
Bank of Canada Governor Stephen Poloz gave a speech earlier during the week where the markets took special notice of the fact that the BoC’s surprise rate cut last month was more of an “insurance” against the downside risks to inflation. A day later, Canada’s CPI data managed to modestly rise, beating estimates. Coupled with the data, the possibility of another rate cut in March is slowly fading for the moment, giving short term strength to the Canadian dollar especially against the Greenback. The currency remains mixed however, weaker against other stronger currencies such as the British Sterling.
- Corporate profits q/q -2.8% vs. 3.7% previously
- BoC Governor Poloz speech
- Core CPI m/m 0.2% vs. 0.1%; CPI m/m -0.2% vs. -0.4%
Yen takes a backseat
With the high risk events from the US and the UK, the Japanese Yen had little to offer this week and thus remained largely stable against the volatility. While the Yen initially weakened, the safe haven currency firmed up against most of its peers and looks to be holding to its gains at the time of writing. Bank of Japan’s monetary policy meeting minutes had little to offer this week.
- Household spending y/y -5.1% vs. -4%
- Tokyo Core CPI y/y 2.2% vs. 2.2%
- National Core CPI y/y 2.2% vs. 2.4%
- Unemployment rate 3.6% vs. 3.4%
- Preliminary industrial production m/m 4% vs. 2.9%
- Retail sales y/y -2% vs. -1.2%
- Housing starts y/y -13% vs. -11.1%
Greenback takes a pause
The US Dollar was volatile this week on account of the fundamental risks both in terms of the economic data as well as the Fed Chair’s testimony. Regardless the markets are starting to take the bullish view on the Greenback especially after Core CPI was starting to show signs of stabilizing near the 1.6%, GDP numbers showing a pick up in the economy and a strong and stable growth in the jobs market.
- Existing home sales 4.82mn vs. 5.03mn
- Flash services PMI 57 vs. 54.5
- Richmond manufacturing index 0 vs. 7
- CB Consumer confidence 96.4 vs. 99.6
- Fed Chair Yellen testifies
- New home sales 481k vs. 471k
- CPI m/m -0.7% vs. -0.6%; Core CPI m/m 0.2% vs. 0.1%
- Unemployment claims 313k vs. 288k
- Core durable goods orders m/m 0.3% vs. 0.6%; durable goods orders m/m 2.8% vs. 1.7%
- Housing price index m/m 0.8% vs. 0.5%
- Preliminary GDP q/q 2.2% vs. 2.1%
- Preliminary GDP price index q/q 0.1% vs. 0%
- PCE Annualized q/q 4.2% vs. 4.3%