Morning Report: 7 February 2017

7th February 2017 By: Ranko Berich

GBP Sterling headed lower against USD yesterday, and after a brief rally overnight, is again on the back foot this morning. Growth in consumer spending was down in January compared to last year, falling 0.1% in January according to the Retail Sales Monitor released by the British Retail Consortium this morning. Helen Dickinson, Chief Executive of the BRC, described the last three months as “the slowest growth of the festive period since 2009”, particularly concerning given that retail sales was the primary driver of growth in the second half of 2016. Today at 08:30 GMT the Halifax House Price Index will be released.

EUR The euro was solidly on the back foot yesterday, losing to both USD and sterling as European Central Bank President Mario Draghi engaged in a combative testimony session with European lawmakers. Draghi once again aggressively defended the ECB’s current quantitative easing measures, saying he did not think the current energy-driven spike in prices was improving the medium term outlook for inflation and that QE was still needed for inflation to converge upwards between eurozone economies. Yesterday Sentix Investor Confidence fell slightly, while remaining indicative of overall growth among the surveyed investors and economists. This morning, German Industrial Production fell by a whopping 3%, erasing the last two months of gains, although after yesterday’s 5.2% increase in factory orders and a generally positive tone of survey data the direction of the sector should not be assumed off the basis of any one monthly data point.

USD The dollar showed tentative signs of strength yesterday, after the Federal Reserve’s Patrick Harker said that March “should be considered” for a rate hike. Despite his enthusiasm for March, Harker remained in line with the general consensus of three rate hikes for 2017. Today at 13:30 GMT Trade Balance data will be released, and will be worth watching due to President Trump’s focus on the US trade deficit as a negative, which could make for some interesting action on the Presidential Twitter account at the time of the release. At 15:00 the Job Openings and Labour Turnover Summary will be released.

CAD The loonie began to weaken again yesterday, and is again on the defensive this morning, ahead of a number of interesting data releases this afternoon. Trade Balance will be released at 13:30 GMT alongside monthly Building Permits, and the survey based Ivey Purchasing Managers’ Index will be released at 15:00. The Financial Times yesterday reported on soaring long positions on oil prices from hedge funds and speculative investors, which had reached a record level. The optimism of speculators on oil prices hinges on faith in OPEC’s ability to end the current global supply glut – and an inability of North American producers to pick up the slack. Rig counts in the US and Canada have been soaring, and if a strong supply response drowns the OPEC cut, and the record level of speculative longs could make for a rapid reversal.

UK News

  • Retail sales slow as UK shoppers cut non-essentials – FT. Data add to evidence consumer-driven expansion may be fading. Growth in retail sales slowed slightly in January compared with last year, adding to evidence that the UK’s consumer-driven expansion may be fading. Total sales increased 0.1 per cent compared with 1.2 per cent last year, according to the retail sales monitor from the British Retail Consortium and the consultancy KPMG. While monthly figures can be volatile, the survey also found the quarterly rate of growth had slowed compared with one year ago. “Looking across the last three months, we’ve seen the slowest growth of the festive period since 2009,” said Helen Dickinson, chief executive of the BRC.
  • UK consumers cut back on spending in January as inflation worries mount – Reuters. British consumers reined in their spending last month, an industry survey showed on Tuesday, adding to signs that they are turning more cautious as last year’s Brexit vote pushes up inflation. On a like-for-like basis – which excludes new store openings – sales fell by 0.6 percent compared with January last year, the British Retail Consortium said. It was the first time that like-for-like sales fell since August last year, which was shortly after voters decided in June to leave the European Union.