This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Despite moving into the New Year it remains old themes that are likely to have a strong bearing on currency movements in the first few months of the year of the year. With less than three weeks until Donald Trump’s inauguration as US President (January 20) and Theresa May expected to invoke Article 50, the legislation that will begin the UK’s formal negotiations to leave the EU, by the end of March, currency markets will remain at the mercy of political events on both sides of the Atlantic in early 2017.
However, with that said, in the near term it is macroeconomic data that might likely provide the majority of FX market movements this week rather than geo-politics, as key central bank policy meetings do not begin until next week. US Non-Farms Payrolls data for December, released on Friday, headlines a busy week for stateside macroeconomic readings, which includes the release of the minutes from the December FOMC meeting that culminated in only the second Fed rate hike since the financial crisis.
Whilst the former is expected unchanged on the previous month, any surprise to the upside could help to see the US Dollar’s stellar end of 2016 rally continue to ramp up the gears. Meanwhile the Fed minutes will provide further insight into the mindset of policymakers who see 2017 providing three further rate hikes; after last year’s calamitous bullish outlook that only resulted in one rate hike instead of the projected four, could the minutes show a more cautious view of the US economy in 2017 given political uncertainties?
On this side of the Atlantic, currency performances are likely to be derived from the strength (or weakness) of their stateside counterpart, with the exception of the Euro. Wednesday’s December reading of Consumer Price Inflation (CPI) will look to continue on from Tuesday’s solid headline German figures, something that would come as a relief to European Central Bank President Mario Draghi and his peers as the policymakers look to decrease Quantititave Easing (QE) in the Eurozone. A strong CPI reading alongside other healthy macro readings could help the European currency avoid posting a fresh 14-year low against its US equivalent as it heads ever closer towards parity.
Finally, a dearth of any significant macro data releases could leave the UK’s Pound Sterling lacking direction as PMI figures will likely have only a minimal bearing on GBP currency pairings. However, with the Supreme Court ruling on Brexit expected to be given “in the New Year” according to a court spokesman, the currency may have a surprise shock should any announcement be made this week.
If the ruling is a repeat of the High Court’s ruling, it is likely that a repeat of Sterling strength may occur, however a rebuttal of the lower court’s decision would leave PM Theresa May clear to invoke Article 50 without parliamentary approval at the end of March, something that could lead to the test of the currency’s post-referendum lows.
Key data this week (Sign up here to get our daily live macro-calendar)
UK Economic Announcements
09:30 PMI Manufacturing
Intl Economic Announcement
00:30 PMI Manufacturing (JP)
08:55 Unemployment (DE)
13:00 Consumer Price Inflation (DE)
14:45 PMI Manufacturing, ISM New York (US)
15:00 ISM Manufacturing, Construction Spending (US)
—
UK Economic Announcements
09:30 PMI Construction, Consumer Credit, Mortgage Approvals
Intl Economic Announcements
01:45 Caixin PMI Services (CN)
09:00 PMI Services (EZ)
10:00 Consumer Price Inflation (EZ)
19:00 Fed Minutes (US)
—
UK Economic Announcements
09:30 PMI Services
Intl Economic Announcements
00:30 PMI Services (JP)
09:10 Retail PMI (EZ)
10:00 Producer Price Inflation (EZ)
13:15 ADP Employment Change (US)
14:45 PMI Services (US)
15:00 ISM Non-Manuf (US)
16:00 Crude Oil Inventories (US)
—
Intl Economic Announcements
07:00 Factory Orders (DE)
10:00 Confidence Indicators, Retail Sales (EZ)
13:30 Non-Farm Payrolls, Trade Balance (US)
15:00 Factory Orders, Durable Goods Orders (US)
Technicals
Technicals
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.