Yesterday’s Markit/ CIPS Construction Survey showed that the uncertainty over Brexit dampened the construction sector’s recovery. The total activity index dropped to its lowest level since the March snowstorms last year, and the builders’ outlook isn’t much better. The manufacturing/ construction industries decisions in light of Brexit uncertainty have captured many of the headlines after Nissan reversed a promise to produce of one of its flagship 4×4 models at its Sunderland plant, instead deciding that the car would continue to be produced in Japan. This morning saw the release of the BRC Sales monitor, a precursor to the Retail Sales index, which grew from -0.7% to 1.8%. The consumer looks as if it is bucking the trend of negative data surprises due to Brexit as higher wage growth shows initial signs of filtering through. The caveat, however, is that purchases of big-ticket items, that are considered more of an investment, have fallen.
The euro joined all the currencies from the G10 board in posing losses against the dollar in a relatively uneventful day in the Eurozone. The Producer Price Inflation reported a monthly contraction of 0.8%, although this can hardly be accounted as a surprise among the string of weak data coming out from Europe lately. The neutral stance of the Federal Reserve keeps providing certain support to the currency pair whereas no particularly good news from the European Central Bank is expected to prompt the euro in the foreseeable future. Meanwhile, investors are holding their breath for how the US-China trade fight saga will unfold and what position European exporters will be left in. Today, Eurozone Retail Sales will be released at 10:00 GMT.
The unbeatable greenback topped the currency boards yesterday, despite November Factory Orders contracting by 0.6%, falling in line with the story that after the European and Chinese manufacturing sectors slowing down, now also US manufacturing suffers. The combination of a government shutdown, trade policy uncertainty and the slowdown of the global economy seems to be making its first dents into US capital spending. Today at 16:00 GMT President Trump will hold the annual State of the Union speech in which he will lay out his legislative priorities for the year. Expect the words “wall”, “China” and “government shutdown” to feature prominently in the speech, while the President may also use this speech to declare a national state of emergency in order to release funds to start the construction of the Mexican border wall.
The loonie has clawed back nearly 4% against the US dollar since the turn of the year, and as oil prices continue to rise slowly the Canadian currency batted off a swathe of USD strength yesterday. The loonie didn’t only fend off a strengthening US dollar but also a sharp drop in WTI prices from $55.75 to $53.30 per barrel. The crude move came after poor data was released from the US showing a sharp decline in the demand for durable goods, such as machinery, and US manufactured items. In a market that is looking for direction, which was previously up after the OPEC+ cuts and tariffs on Venezuelan petroleum, the data release rocked investors sentiment. Canadian trade data was scheduled for release today, but the US government shutdown has meant that the data release will be postponed until an indefinite date.