Morning Report: 30 January 2017

30th January 2017 By: Ranko Berich

GBP Sterling’s upwards trend from this month was challenged over the second half of last week, despite some solid Gross Domestic Product data. Market attention will be firmly focused on this week’s “Super Thursday” events at the Bank of England, when Governor Mark Carney and Monetary Policy Committee colleagues will present the latest Inflation Report in a press conference, while the MPC’s latest rate announcement is made. No data will be released today, meaning tomorrow’s release of BoE Money Supply data at 09:30 will be the first major event of the calendar.

EUR The euro is paring its gains after a very slow start to the week during early trading in Asia last night and in the early hours of the morning. Friday’s data included a 2.0% year on year increase in the Private Loans measure of M3 Money Supply, and a 1.9% month on month increase in German Import Prices. Throughout this morning German Consumer Price Index data will be released on a regional basis, culminating in Germany wide inflation at 13:00. German politicians and some central bankers have been advocating for tighter monetary policy for some time now, and today’s release could further bolster their case. Spanish Gross Domestic Product was also released at 0.7% quarter on quarter. Later in the week, Eurozone Consumer Price Index inflation will be released on Tuesday, alongside Gross Domestic Product Growth.

USD USD is finding its legs this morning after a rough session overnight that saw the greenback come under pressure. Donald Trump’s new restrictions on inbound travellers from selected Muslim majority nations seemed to cause some consternation in markets, as well as a wave of protests. The dollar weakness may also have been a residual effect of Friday’s Gross Domestic Product figures from the fourth quarter, which showed the US economy growing at just 1.6%, the slowest in five years. The Federal Reserve’s Federal Open Markets Committee meets on Wednesday, expected to hold interest rates, however Janet Yellen’s statement at the conclusion will be of interest.

CAD The Canadian dollar is retreating against the USD, as the greenback rose at the beginning of the European session. This is despite the poor US GDP data from last Friday. No data is expected today from Canada, however the market will be attentive to the November GDP data to be released tomorrow.

UK News

  • Donald Trump backs down on green-card immigrants – FT. Denounced by foreign governments, extreme vetting prompts protests across US. President Donald Trump has decided to allow green card holders from the Muslim countries targeted in his extreme vetting programme to enter the US, in the first reversal since he revealed his controversial immigration policy on Friday. After a weekend of chaos that saw US permanent residents and refugees from some Muslim nations detained at US airports, John Kelly, the homeland security secretary, issued a statement that green card holders would be allowed back into the country.
  • Bank of England to sit tight as Brexit cross-winds blow – Reuters. Mark Carney, who has spent much of his time in charge of the Bank of England trying to signal what the central bank is planning, will probably say next week that he doesn’t know what its next move will be. Carney and his fellow policymakers are likely to stick to their neutral stance on whether to cut or raise interest rates in future, due to the scale of uncertainty about the impact of last year’s referendum decision to leave the European Union. Economically, Britain has so far coped much better than expected with the shock vote. It was probably the world’s fastest-growing big advanced economy in 2016, confounding forecasts from the BoE and almost everyone else of a swift Brexit hit.