Sterling continued the trend lower against the Dollar yesterday, breaking below the key psychological level 1.3000 reaching as low as 1.2961. November’s UK GDP data printed weaker than expected at -0.3% for the month, whereas 0.0% had been forecasted. The release will add to weight to expectations of a Bank of England rate cut by the end of the month.
Weaker services, -0.3% and industrial production figures, -1.2% were both far below expectations, and provided most of the disappointment that dragged Sterling down. Conversely, Construction data printed +1.9% on the month, way above the +0.6% m/m expected. Firm global risk appetite provided an element of Sterling support and there was a recovery to near 1.3000 against the Dollar, although the Euro sustained the bulk of gains to trade near 1.1670.
Sterling dipped again on Tuesday with the Euro moving above 1.1655. The data docket is empty today so most of the stimulus will be generated over the pond.
US employment trends for December declined to 109.7, from 110.5 previously. Boston Fed President Eric Rosengren stated that the US economy faced upside inflation and financial stability risk. He stated that low rates may induce too many financial risks and are below a neutral rate given the healthy economy. The market was also largely unmoved with strong expectations that the Fed will hold interest rates in the short term.
Firm global risk appetite slightly curbed Dollar support with investors given a dip in defensive demand. The Dollar failed to make headway overall and the Euro settled around 1.1140. Today’s data docket is filled with US inflation data releases.
With the current upbeat mood in the global markets. Optimism is lifting the Euro to the upper end of the weekly range of 1.1130/45 against the Dollar. The pair have been trading on a positive note since last Thursday on the back of the improved mood in the risk-associated universe in response to rising hopes of a US-China trade deal and shrinking geopolitical jitters.
Nothing worth mentioning data-wise in Euroland today. As of writing, the Euro is trading at 1.1135 against its Dollar counterpart.
Data to watch
13:30 - USD - CPI
13:30 - USD - Core CPI
Posted in Daily Market News on Jan 14 2020