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02 Feb 2017
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Sterling collapses on Carney comments

United States Dollar:

Yesterday saw the latest Bank of England Inflation Report and Monetary Policy Statement from Governor Mark Carney and the MPC. Sterling had been rising ahead of the publication and a lot of the content was encouraging to say the least. Growth forecasts for 2017 were revised up from 1.4% to 2.0% and expectations for inflation were a peak of 2.8% in early 2018 lower than many forecasts meaning less of a squeeze on consumer spending. Crucially, however the report did little to raise the chances of an interest rate rise anytime soon and Mark Carney was equally dovish when questioned on the matter in the accompanying press conference stating, in typical central banker fashion, that the next move could be lower should the UK economic environment deteriorate. Markets were obviously expecting something more definite/assertive on the possibility of a 2017 hike given some surprisingly strong post-referendum data and the pound got hammered as a result. With GBP/USD hovering around the 1.27 handle before the release it immediately dropped to 1.2580 and was pushed even lower throughout the presser before settling around 1.2550 at its conclusion.

At Westminster, Theresa May lay out the government’s strategy for Brexit with the publication of a white paper yesterday which highlighted several key points the government wishes to focus on during the negotiations with the EU once Article 50 has been triggered. One of the points set to be debated next week is giving further powers to Scotland, Wales and Northern Ireland once the secession has been completed. This has been more than likely included in an effort to try and appease the pro-European Scottish electorate and SNP leader Nicola Sturgeon. Debate begins next week. Away from London there was another strong Unemployment print from the States of 246K. This morning has just seen an under-par Services PMI from the UK with the 54.5 shown missing the target of 55.8 by some distance. Today’s big event is the jobs report from the US with the Non-Farms Employment Change expected at 170k. Cable sits at 1.2490.

We expect a range today in the GBP/USD1.2415 – 1.2580

Euro:

There has been little economic data of note from the Eurozone at the end of this week however EUR/USD has fallen away from the 1.08 handle as traders, with one eye on today’s NFPs, took profit on the euros recent gains. EUR/USD hovers around 1.0750 at present with GBP/EUR at 1.1620.

We expect a range today in the GBP/EUR rate of 1.1575 – 1.1710

Aussie and Kiwi Dollars:

Like the euro the Aussie and Kiwi have fallen away at the end of the week as traders reposition ahead of the US jobs report. The next releases of note for the antipodeans is Mondays Retail Sales figure rom Australia and Tuesdays Inflation Expectations print from NZ. GBP/AUD is at 1.6320 and GBP/NZD is at 1.7170.

We expect a range today in the GBP/AUD rate of 1.6240 – 1.64

We expect a range today in the GBP/NZD rate of 1.7030 – 1.7225

Data Releases

AUD: No data

EUR: No data

GBP: No data

NZD: No data

USD: Average Hourly Earnings m/m; Non-Farm Employment Change; Unemployment Rate

 

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