This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Ahead of next week’s key European Central Bank monetary policy update, and the closely watched Davos summit in Switzerland, Euro traders will be keeping their eyes peeled and their ears open for any policy snapshots divulged by policymakers. So far this week, however, it has not been good news for the Bulls.
Already, ECB sources have quashed rumours that the central bank will look to curtail asset purchases at a faster rate than markets were expecting – contrary to the noticeably hawkish minutes from December’s meeting – while reports from Germany are suggesting further stalemate in ongoing grand coalition talks between Angel Merkel and the SPD.
Which sets the stage nicely for the final December Eurozone CPI print on Wednesday (10am). While ECB policymakers are confident of a broad recovery in economic conditions in the Eurozone, inflation remains stubbornly below the central bank’s target. Should the inflation rate be confirmed at 1.4%, 0.1% slower than in November, it would mark the 8th consecutive month of price growth of 1.5% or lower, and the 10th below the ECB’s 2% target. Any surprise upside, however, could see the single currency improve on its early week performance.
For the mean time, this early week Euro weakness is having a noticeable impact on the US dollar.
Fresh from trading 3-year lows, the global reserve currency is trading off its lows as investors digest the latest news from the European continent. The uncertainty stemming from Brussels and Berlin has helped the dollar to its first positive session in a week. Whether this recovery continues may be hinging on speeches from Federal Reserve policymakers.
With just two weeks left until the central bank’s first meeting of 2018, and maiden meetings for several regional governors, no change is expected. However, the rhetoric heading into the next seven meetings will be pivotal.
On Wednesday, a trifecta of speeches from policymakers Evans (8pm; non-voter), Kaplan (8:15pm; non-voter) and Mester (9:30pm; voter) could have a significant impact on the greenback, while other snippets throughout the week will be closely watched.
Meanwhile, Sterling traders will have to wait until Friday for their main event of the week. UK Retail Sales (Friday; 9:30am) for the key trading month of December will be digested by investors as a key barometer for the strength of the UK economy.
Underlying themes of Brexit-inspired spending concerns, alongside a pinch on consumers’ pockets due to subdued wage growth versus high levels on inflation, have driven speculation of a high street in danger of disappearing.
However, early Christmas trading reports from high street retailers have been broadly positive, and could raise the possibility of a strong reading on Friday. Expectations are for a print of 3%, just shy of December 2016’s 3.8%, however this would be the strongest reading since April’s equivalent 3.8%.
Other macroeconomic data of note this week includes US Industrial & Manufacturing Production (Wednesday; 2:15pm), US NAHB Housing Market Index (Wed; 3pm), UK RICS House Price Balance (Thursday; midnight), US Building Permits & Housing Starts, and the Philly Fed Manufacturing Index (both Thurs; 1:30pm), the Fed Beige Book (Thurs; 7pm), German Producer Price Inflation (Friday; 7am) and the US Michigan Consumer Sentiment (3pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
—
Intl Economic Announcements
07:00 Wholesale Prices (Germany)
10:00 CPI, Construction Output (Eurozone)
14:15 Industrial & Manufacturing Production (US)
15:00 NAHB Housing Market Index (US)
—
UK Economic Announcements
00:01 RICS House Price Balance
Intl Economic Announcements
02:00 GDP, Industrial Production & Retail Sales (China)
04:30 Industrial Production (Japan)
13:30 Building Permits & Housing Starts, Philly Fed Manufacturing Index (US)
16:00 Oil Inventories (US)
19:00 Fed Beige Book (US)
—
UK Economic Announcements
09:30 Retail Sales
Intl Economic Announcements
07:00 PPI (Germany)
09:00 IEA Oil Market Report (World)
15:00 Michigan Consumer Sentiment (US)
For information on deliverable FX, including how you can save thousands on currency exchange, put in a call to our trading floor on 0203 051 7461. It’s all part of the service!
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
Comments are closed.