Last week we saw some economic indicators showing weakness in the potential future demand of UK consumers. One of these Indicators is the Average Earnings Index; coming out at 2.6%, less with about 0.2% lower than the forecast of 2.8%, we will recall that the BOE Governor Mark Carney cited that one of the reasons why the UK economy didn’t immediately feel the impact of BREXIT was due to the resilience shown by the U.K consumers, the other indicator was the retail sales figure for January coming out at -0.3% as against the expectation of 1.0%, the retail sales figure for December too was in the negative territory slightly revised higher from -1.9% to -2.0%, this is the first time since Brexit that we are having a back-to-back negative retail Sales figure, this could mean that consumers are getting cautious in anticipation of the March 31st agreed date for Article 50 trigger, in the days ahead we expect to see further downward pressure on the Cable.
Going further, “the FEDERAL RESERVE BANK CHAIRMAN” JANET YELLEN, appeared before the Select Senate committee on Banking to give her Semi-Annual report on Monetary Policy, in that report Yellen said the bank will be making a mistake if I doesn’t adjust rates at the appropriate pace this year. This traders interpreted to be hawkish as we saw the buck strengthen after this comment. It was assumed that because of President Trump’s possible reflational policies that inflation would pick up strongly making the FEDZ adjust rates at a faster than expected pace, this they felt was responsible for her hawkish comments. We also saw the CPI data come in on Wednesday with a reading of 2.5% y/y and 0.6% m/m beating expectations by 0.3%, and the core-CPI at 2.3% y/y and 0.3% m/m beating expectations by 0.1%; with this strong rise in inflation we are therefore seeing a strong case for a sooner than expected rate hike.
However, the Commodity currencies all painted a different picture starting with the AUSSIE, the Employment Data came out stellar with a 13.5K increase in net jobs nevertheless on a closer look we see that the Private Sector which recorded an improvement in full time jobs in December fell to -44.4k, this is casting a shadow of doubt on the already recovering private sector in Australia, though the AUSSIE spiked up on the release of the data nevertheless it quickly reversed those gains as traders interpreted the real impact of those outcome on the ECONOMY. For the KIWI the Retail sales q/q data came out lower than the forecast nevertheless it was better than the retail Sales for Q3, though positive nevertheless it fell short of expectations dampening the Economic outlook for the KIWI.
Lastly, CANADIAN Manufacturing Sales Data for December came out at 2.3% beating expectations by a full 0.9% of 1.4%, this is giving a boost to the Canadian Outlook, coupled with the North Dakota and Keystone XL deal that is set to sail through sometime in March.
THE WEEK AHEAD
Being the last week in the month of February, we really don’t have much risk events in the coming week, it is expected that the week will be driven by majorly Technicals.
Nothing of impact for today
AUD: (1.30AM) MONETARY POLICY MEETING MINUTES;
Based on the outcome of the statement we could see a bullish reaction nevertheless a deviation from the statement would see a sell-off in the AUSSIE
EUR: (9.00AM-10.00AM) FRA, GER, EUR MANUFACTURING& SERVICE PMI;
We have been seeing strong releases from this data, we expect continuity nevertheless we expect a muted impact from this data.
GBP: (11.00AM) INFLATION REPORT HEARINGS;
Governor Mark Carney is expected to downplay the rising inflation once again this should make the GBP weaken based on this info.
NZD: (3.00PM) GDT PRICE INDEX;
Positive outcome expected although we may see a slowdown from the highs because of the dwindling effects of the Yuletide season
AUD: (1.30AM) WAGE PRICE INDEX;
A positive outcome from this data would imply the living standards of the Consumers are beginning to pick up, which could have a broader impact on the general economy.
GBP: (10.30AM) SECOND ESTIMATE GDP q/q;
Except we see a deviation from the outcome of the Advance release we should have a muted impact from this data nevertheless we expect this data to remain upbeat as a result of the positive outlook in Q4.
GBP: (10.30AM) PRELIM BUSINESS INVESTMENT q/q;
Focus will be on this data today because traders will be looking for signs of dampening outlook in the Uk economy underscoring the expected BREXIT effect, if this happens we should see the Cable weaken as a result of this.
EUR: (11.00AM) FINAL CPI y/y;
No change expected, therefore muted impact expected, except we see a deviation from the Preliminary Release (Highly Unlikely) we should see no reaction to this data. Nevertheless the focus in the long term will be for changes in the Core CPI y/y.
CAD: (2.30PM) RETAIL SALES;
We had a stellar outcome for the December reading of the Manufacturing Sales, we could see an overflow into this data, also considering the yuletide seasonal effect on consumer spending.
USD: (8.00PM) FOMC MEETING MINUTES;
Based on the FED meeting and the recent hawkish comments coming from the FEDZ and voting members, we should see an upbeat data from this release.
AUD: (1.30AM) PRIVATE CAPITAL EXPENDITURE q/q;
The outcome of this data is very important, as it would help us see if Companies Economic outlook is improving, an upbeat release would mean that Industries and Business owners are optimistic about the future business outlook and environment and that’s why they are taking on capital intensive ventures.
USD: (5.00PM) CRUDE OIL INVENTORIES;
We have been seeing a massive increase in crude oil stockpiles, this we have been emphasizing could imply an expected rise in crude oil prices hence the reason for increase in stock pile so as to mitigate against future price spikes. Considering the Volatility of Energy prices.
AUD: (11.30PM) RBA GOV LOWE SPEAKS;
He is due to testify before the House of Rep standing committee on Economics, during this review we should see him upbeat about the AUSTRALIAN economy this should make the AUSSIE strengthen.
CAD: (2.30PM) CPI y/y;
We should expect a positive outlook on this inflation report, as energy prices has picked up strongly coupled with rising demand of retailers during the festive period.