Morning Report: 19 January 2016

19th January 2016 By: Ranko Berich

GBP Currency markets took news of slowing Chinese GDP growth in their stride overnight, with the lack of any major risk off event giving sterling room to stage a very small rally, after being close to breaching its 2010 lows against USD late last night. Despite the slight recovery, sterling remains in a precarious position, with further downwards moves potentially proving self-reinforcing if the 2010 low does not hold. The stakes, therefore, are high for today’s 09:30 release of Price Index data. Consumer Price Index inflation is expected to increase 0.2% month on month in December, leaving the index 0.0% changed year on year. Core inflation, which excludes fuel prices is expected to be significantly healthier at 1.2% year on year. With expectations rather low and sterling on a solid downwards trend, some good news could see sterling extend its modest overnight gains, although of course a miss at this point could prove disastrous.

EUR The euro has yet to see a discernible trend emerge this week, following the strength it experienced off the back of market volatility at the start of this year, although it did weaken marginally overnight. This morning has already seen the release of the final revision of the German Consumer Price Index, which showed prices falling 0.1% month on month, erasing last month’s modest improvement and leaving the index basically flat for the last half a year. At 09:00 GMT, the eurozone’s Current Account data will be released, followed at 10:00 by overall eurozone CPI and the important ZEW Economic Sentiment survey.

USD The US dollar had a rare bout of weakness last night, with the release of Chinese GDP data proving solid enough to trigger a relief rally in the commodity currencies, which have been under huge pressure recently. The Canadian, Australian and Kiwi dollars all performed well, although in turn the dollar did manage to notch up some minor gains vs the euro and the Japanese yen, as support for these currencies due to risk aversion dropped off somewhat. Not much headline US data will be released today, although the NAHB Housing Market Index will be released at 15:00 GMT, followed at 21:00 by securities purchases data from the Department of the Treasury.

CAD The loonie finally appears to have found somewhat of a reprieve against USD overnight, as crude oil rallied from Friday’s lows. Chinese fuel demand data showed a decent improvement in 2015, according to preliminary data released overnight, as well as on-expectations GDP data and better than expected Retail Sales growth. Today at 13:30 GMT, Foreign Securities Purchases data will be released by Statistics Canada.

UK News

  • FT. UK shoppers hunt for ‘affordable luxury’ after austerity fatigue: It was the Christmas when the puddings were laced with cognac, not brandy, and when we swapped sausage rolls for salmon and scallop tarts.
  • Reuters. BoE’s Vlieghe “patient” on rate hike, could back cut if slowdown worsens: The Bank of England’s newest policymaker Gertjan Vlieghe said on Monday he would take a “patient” approach to raising interest rates and there was even a chance he might favour a cut if a slowdown in Britain’s economy worsened.
  • Daily Mail. Property asking prices up £1,500 as January rush hits – but first-time buyers benefit as starter home prices stall: Home sellers hiked house prices by £1,500 over the past month, bringing the average asking price across England and Wales up to £290,963, new data revealed.
  • Telegraph. UK’s £1 trillion export target is a ‘big stretch’, says trade minister: Exclusive: UK would have to treble growth “at a time when world trade is shrinking” even to hit current projections.