Morning Report: 12 January 2016

12th January 2016 By: Ranko Berich

GBP Sterling is striking a marginally firmer tone against USD this morning, having staged a short lived rally against the greenback yesterday afternoon. The pound is also trading marginally stronger than yesterday’s open against the euro. Political skirmishing and positioning continued over the looming Brexit referendum, as the Government positioned itself firmly in favour of remaining in the European Union, with David Cameron setting out rules for ministers campaigning for exit. Today at 09:30 GMT, November Manufacturing Production data will be released. It’s no secret that sterling’s appreciation over the last couple of years and weak external demand have weighed on the UK’s manufacturing sector, and expectations are for only a modest recovery from October’s 0.4% fall is expected. Later in the afternoon, Bank of England Governor Mark Carney will speak at 14:15 GMT, followed at 15:00 GMT by the latest Gross Domestic Product estimate from research ground NIESR.

EUR The euro’s “risk off” gains from investors fleeing turmoil in global markets seemed to taper off somewhat yesterday, despite ongoing chaos in Chinese markets and commodities. Sentix Investor Confidence fell slightly in January, which is unsurprising considering the rocky start 2016 has seen. No major euro data will be released today, putting the focus on domestic politics and international risk assets, especially crude oil.

USD Despite EURUSD receding from yesterday’s highs, risk aversion remains a major theme in USD trading, with the greenback stronger versus NZD, AUD, CAD and weaker to CHF and JPY overnight. Chinese authorities set the daily USDCNY fix relatively unchanged from before, intensifying the cold war between themselves and international currency speculators, who remain positioned firmly short on the Chinese currency. Economic data has taken somewhat of a back seat amid these developments, although today will see the Job Openings and Labour Turnover Summary released at 15:00 GMT, preceded by a speech from the Federal Reserve’s Stanley Fischer at 10:30 GMT.

CAD The loonie weakness seen this year has been so significant that it’s getting hard to find new superlatives to describe each new low on CAD. The latest collapse in crude oil has send USDCAD to yet another fresh high for the year, as analysts including Goldman Sachs lined up to warn that we could see $20 a barrel oil in 2016. No major Canadian data will be released today, meaning crude oil movements will continue to be the be all and end all for the loonie.

UK News

  • Reuters. Insight – British employers keep tight grip on pay despite recovery: Britain’s economy is heading into its seventh year of growth after the financial crisis but for many employers such as Mike Naylor, who runs a small metal-casting firm, business is too uncertain to raise staff pay by much this year.
  • FT. Half of small businesses struggle with new pensions: Almost half the UK’s small businesses do not fully understand how to set up workplace pension schemes, as a deadline looms for more than 1m to do so.