Morning Report: 25 January 2016

25th January 2016 By: Ranko Berich

GBP Sterling continued to hover near multi-year lows last week, but Friday’s session saw the pound pick up just slightly. Friday’s main data release was Retail Sales, which fell well short of expectations and showed a 1% contraction in spending over December, after the 1.3% spike in November. Today at 11:00 GMT CBI Industrial Order Expectations will be released, and will be an important data point to watch due to the slowdown seen in Britain’s industrial sector. Later in the week, Bank of England Governor Mark Carney will speak tomorrow at 10:45, and the first reading of Gross Domestic Product Growth in the final quarter of 2015 will be released on Thursday at 09:30.

EUR The euro generally fared well last week, as risk-off sentiment continued to support the single currency, which only just began to fall off towards the end of the week after another masterful press conference from the European Central Bank’s Mario Draghi. Crude oil is falling this morning and the initial reaction has been a new wave of risk aversion that sent European equities lower, although the euro has not reacted significantly yet. Today is a busy day for the euro data calendar, beginning with the IFO German Business Climate Survey which has already showed a slightly deterioration in business optimism from last month. Later in the morning Italian Retail Sales will be released at 10:00, followed at 18:00 by a speech from Mario Draghi. Later in the week, German CPI will be released on Thursday, followed by French and Eurozone inflation on Friday.

USD USD is advancing against commodity currencies this morning (CAD, AUD, NZD and NOK), while falling versus EUR, JPY and CHF. Risk off sentiment is once a driver in fx, equity and commodity markets, after news emerged that Saudi Aramco, the world’s biggest crude oil exporter, will maintain investments in oil and gas despite extremely low crude oil prices. This week’s calendar contains a number of important events, most notably the Federal Open Market Committee’s latest interest rate decision on Wednesday, and the first release of Gross Domestic Product growth, on Friday. No changes in monetary policy are expected although worries over crude oil prices fluctuations could be mentioned in the FOMC statement, while the US economy is expected to have stagnated somewhat in Q4.

CAD Crude oil begins the weak on the back foot after comments from Saudi Aramco, the biggest global crude oil exporter, indicating they are keeping up investment in oil and gas despite extremely low crude oil prices. Crude oil has dropped overnight some 3% from last week’s highs and, consequently, CAD is under pressure since the beginning of the trading session. This week is muted in terms of macro data, although on Friday Gross Domestic Product data will be released at 13.30 GMT.

UK News

  • Reuters. UK watchdog “deeply concerned” about leak of official statistics: Hundreds of British civil servants received unauthorised access to potentially market-sensitive data earlier this week before it was officially released, the country’s statistics watchdog said on Friday.
  • Reuters. UK Christmas retail sales slide, pressure on public finances eases: British consumers reined in their Christmas spending by the biggest amount in over six years but there was more cheer for Chancellor of George Osborne after government borrowing dropped sharply, official data showed on Friday.