Morning Report: 6 March 2017
6th March 2017 By: Ranko Berich
GBP. Sterling pared its losses against USD on Friday, after a bruising week that ended with disappointing survey figures from the services sector. Markit’s Services Purchasing Managers’ Index fell to 53.2, below expectations and below last month’s figure. The results came after a fall in Market’s Manufacturing Purchasing Managers Index earlier in the week. This week’s main focus will be the release of the annual budget by Chancellor Philip Hammond on Wednesday. Although Hammond has already laid out the broad strokes of his fiscal policy in last year’s autumn statement, there are some things to look out for such as how the Chancellor deals with an expected windfall surplus, and also a growing crisis in social care and the NHS. A review of business rates is also expected. Today at 11:30 GMT the Bank of England’s new Deputy Governor Charlotte Hogg will speak.
EUR. Like sterling the euro managed to claw back some of its recent losses against USD on Friday, but also managed to strengthen versus sterling. Strong eurozone survey data in the form of Markit Services Purchasing Managers Indices helped the euro along, with the services sector across the area’s major economies performing strongly, but eurozone Retail Sales contracted for the third consecutive month in January. This morning at 09:10 GMT Retail PMI will be released, followed at 09:30 by the Sentix Investor Confidence index. On Thursday the European Central Bank will present its latest monetary policy decision in a press conference, and the French and Dutch elections can be expected to continue to produce market moving headlines throughout the week.
USD. USD finally showed signs of taking a break from its upwards trajectory on Friday, as the last Federal Reserve speakers had their say before the Fed begins a self-imposed quiet period ahead of this month’s Federal Open Market Committee Meeting on the 14th-15th. Fed Char Janet Yellen herself seemed to echo the comments of her colleagues from earlier in the week and suggested that the Fed is indeed about to raise interest rates, specifically mentioning this month’s meeting as a requiring assessment for a hike. However, Yellen stressed that further rates hikes would be limited and gradual, her mantra for several years now, indicating that although the likelihood of a hike in March has increased the medium term outlook remains the same. Today at 15:00 GMT monthly Factory Orders data will be released. The week’s biggest event will be Friday’s release of the Non-Farm Payrolls report.
CAD. Canadian Gross Domestic Product came in exactly as expected at 0.3% growth in December, enabling the loonie to take advantage of Friday’s USD pullback to rally, although today has seen a volatile start to trading and the loonie again appears to be on the back foot. Plenty of CAD data will be released this week, beginning with Trade Balance tomorrow, Building Permits and Housing Starts on Wednesday, ahead of Friday’s labour market data.
FT: Tax rises on agenda for Philip Hammond’s Budget. Chancellor eyes higher NI payments for self-employed to offset social care costs. Philip Hammond will announce tax rises in his Budget on Wednesday as he battens down the Brexit hatches with a tight fiscal package intended to protect the country from “unexpected challenges” ahead. The chancellor denounced calls for him to open the spending taps in response to recent good economic news as “reckless”. He will instead announce limited tax rises to pay for extra spending on social care and business rate relief.
Reuters: UK manufacturers enjoy post-Brexit surge in orders. Britain’s factories are growing at their fastest pace in more than three years, helped by the fall in the value of the pound after the Brexit vote and a recovery in core markets in Europe, a survey showed on Monday. The survey, by manufacturing lobby group EEF and consultancy BDO, added to signs that British factories are enjoying a growth spurt, something that Brexit supporters said would be one of the early benefits of leaving the European Union. However, many economists say the revival is unlikely to offset fully the impact on the economy of slower consumer spending as sterling’s fall pushes up inflation. Manufacturing accounts for about 10 percent of Britain’s economy.