Posts belonging to Category Germany



GBP recovers despite threat of hard Brexit

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

GBP/EUR advanced from €1.1529 to €1.1614, GBP/USD peaked at $1.3021 (up from lows of $1.2956), GBP/AUD marched from AU$1.7265 to AU$1.7431 and GBP/NZD improved from NZ$1.8418 to NZ$1.8563.

If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

 

Wise Money market roundup

The pound’s Tuesday gains came in spite of fairly damning comments from German Finance Minister Wolfgang Schaeuble.

The German official warned that Britain ‘will learn Brexit was a mistake’ – indicating that the Eurozone’s largest economy has no intention of making the negotiations easy for the UK.

Other UK news was also less-than-inspiring, with data from the Office for National Statistics (ONS) showing that the UK borrowed significantly more than anticipated in April.

Elsewhere, the euro was supported by upbeat data for the Eurozone, including an impressive manufacturing report for the currency bloc.

The US dollar, meanwhile, fluctuated as the US services index impressed but the nation’s manufacturing equivalent fell short.

What’s coming up money wise?

The pound crept higher on Wednesday, recording modest gains against most the main currencies.

There’s nothing notable on the calendar in terms of UK data today, so any further pound movement is likely to be the result of either political developments or influence from elsewhere.

This morning’s German GfK consumer confidence result beat forecasts, edging up from 10.2 to 10.4, but its impact on the euro was minimal.

However, GBP/EUR volatility may follow today’s speech from European Central Bank (ECB) President Mario Draghi. Earlier in the week German Chancellor Angela Merkel blamed the ECB’s quantitative easing scheme for the relative weakness of the euro.

Any response Draghi makes to those remarks will be closely attended to. If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

We also have the Bank of Canada (BOC) interest rate decision, with a cautious tone from the central bank liable to boost the GBP/CAD exchange rate.

Of course we may also see GBP/USD movement following the publication of the minutes from the Federal Reserve’s last policy meeting. Support for a rate increase in June would benefit the US dollar.

 

 

Trump worries send GBP higher, Scottish vote ahead

The pound enjoyed a day of pretty solid gains at the start of the week.

The pound enjoyed a day of pretty solid gains at the start of the week.

With the currency rising to an almost two month high against the US dollar while recording its best level against the Canadian dollar since December. GBP/AUD also marched to its highest rate since February, although the poundís gains against the euro were more muted.

GBP/EUR spent the day fluctuating between ‘1.1467 and ‘1.1615, GBP/USD advanced from a low of $1.2365 to a high of $1.2612 and GBP/CAD stormed to a high of C$1.6872.

Whatís been happening?

Yesterday the pound managed to romp higher against most of its currency rivals despite a lack of juicy UK data. The currencyís gains were largely in reaction to developments in the US, with a lack of confidence in President Trumpís abilities to push through economic policies triggering heavy US dollar losses.

Comments from Fed policymaker Charles Evans also kept the US dollar under pressure. Although the Federal Reserve Bank of Chicago President indicated that he still envisages three rate hikes taking place this year, he added that two may be appropriate if the current inflation uncertainty persists.

Meanwhile, upbeat German IFO surveys limited the poundís gains against the euro, with German business morale hitting its best level for almost six years.

What’s coming up?

Today the Scottish government is expected to vote in favour of making a request to Westminster for a second independence referendum. Yesterday Prime Minister Theresa May visited Scotland in order to urge Scottish voters to keep Britain unified, asserting that (with Brexit negotiations about to kick off) now is not the time for more discord.

If the Scottish government does vote in favour of pushing forward with referendum plans, the pound could register modest losses later today.

GBP exchange rates may also start giving up their recent gains ahead of tomorrow and the much-anticipated activation of Article 50.

There’s no UK data on the calendar today, but there are US trade balance and consumer confidence figures to look out for. Speeches from various Fed officials (including Chairwoman Janet Yellen) will also be drawing focus, with any interest rate-related remarks having the potential to either send the US dollar lower still or help it recover ground.

Additionally, the GBP/CAD exchange rate could move away from its recent highs if Bank of Canada Governor Stephen Poloz adopts an optimistic tone in todayís speech.

Article 50 activation date sends pound lower

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

The news that Article 50 would be triggered on March 29th saw the GBP/EUR exchange rate fall from a high of  ‘1.1548 to a low of  ‘1.1476. GBP/USD also lost more than 0.3% to slide to 1.2333 while both the GBP/AUD and GBP/NZD exchange rates slumped by over 0.7%.

Wise Money Markets Roundup

Prime Minister Theresa May’s plans to activate Article 50 before the end of March have been hitting headlines for quite some time. As itís been on the horizon for a while, some industry experts had predicted that the impact of the event on the pound would be minimal. While that didn’t stop Sterling falling when the date was confirmed on Monday, the currency could recover its knee-jerk losses over the rest of the week.

Economic data was in pretty short supply on Monday, with the UK Rightmove House Price index coming in at 1.3% month-on-month and 2.3% year-on-year. German producer price data fell short of forecasts, but the report had little impact on the euro as investors instead focused on the results of the latest polls for the French election. Current forecasts put the odds of right-wing candidate Marine Le Pen winning the first round of the process at 26% (neck-and-neck with closest rival Emmanuel Macron).

Currency Forecast

Although Article 50 is likely to remain in the spotlight over the week ahead, this weekís UK inflation data and retail sales figures could help the pound return to its recent highs against peers like the euro, US dollar, Australian dollar and New Zealand dollar.

If today’s inflation data confirms that the annual Consumer Price Index pushed above the Bank of Englandís (BoE) 2% target in February, it would increase the pressure on the central bank to raise interest rates – potentially boosting the pound in the process.

Similarly, this week’s domestic retail sales numbers are expected to show a rise in year-on-year consumer spending and could lend the pound further support if the estimates prove accurate.

However, if either of these reports miss the mark, we may see the poundís decline continue in the build up to March 29th.

Other economic reports to focus on today include Canadaís retail sales data and Australiaís leading index.

UK economy increases 0.7%

The UK economy increased to 0.7% for Q4 of 2016, up from 0.6% the previous quarter.

The UK economy increased to 0.7% for Q4 of 2016, up from 0.6% the previous quarter.

The Gross Domestic Product figures were welcomed by investors, as the pound attempted a rally. The manufacturing industry was given the plaudits as it beat its own expectations, but the ONS slashed estimates for growth in 2016 to 1.8%, down from the 2% it had forecast in January. Exporters in the UK have grown in confidence, with no surprise to GBP levels against most major counterparties since Brexit, a survey announced. Sales of UK products are expected to grow in 2017 with 9% levels higher for Q4 2016, than the previous quarter.

EURUSD hit six week low

EURUSD currency pair hit a six week low touching 1.0537 early this morning as the French Presidential election begins to take shape. With Le Pen looking a strong candidate within France, a move from her rivals has since boosted the currency pair, as Macron agreed a pact against the populist National Front.

Another rate hike expected soon

The Federal Reserve has suggested another rate hike is expected ‘fairly soon’ if important economic data continues to prosper, notably jobs numbers and inflation. The minutes from the meeting, aired yesterday showed the Fed keeping interest rates on hold, and stressed uncertainty will keep rates on hold for the short term until the future becomes clearer. 10 of the members claimed ‘moderate risk’ to inflation fears, which was seen as the main cause to keep rates where they currently stand.

Today’s data comes from the EU and the US, with German Gross Domestic Product expected at 1.7% aligned with 1.7% forecast, with a German confidence survey to add. In the US, Initial jobless claims for the week and continuing claims are to be viewed also with US House Price purchase this afternoon.

Federal Reserve minutes in focus

Risk appetite has returned to the markets following the US holiday on Monday and US equity markets closed at a new record high last night.

Risk appetite has returned to the markets following the US holiday on Monday and US equity markets closed at a new record high last night.

In addition, the price of oil moved higher on the heels of positive comments from the OPEC secretary supporting the Russian ruble and other oil linked currencies.

Tonight, we get the release of the Federal Reserve minutes from the meeting in February. The meeting itself was uneventful but we may obtain more details on the different opinions within the Fed through the minutes. The key focus will be on the timing for the next US rate hike and any signals on this will lead to USD volatility. However, with the Trump administration still to clearly outline their fiscal plans, the Fed is likely to be awaiting further details.

Wise Money eyes Germany as euro is losing grounds

Data from Germany will be eyed today with their Ifo expectations due out this morning. The number is expected to show a further fall in February. This could put more pressure on the euro which is losing ground against its major currency peers led by falling German yields. The movement in the bond market reflects future uncertainties politically and from the potential impact of the perceived Trump effect.

This morning, we are also expecting he second reading of UK GDP for the last quarter of 2016.

Markets open on positive note

We’re opening this morning on a fairly positive note for Sterling, after the Friday fall which was due to weak Retail Sales figures, which put a turn on the weekly strength.

We're opening this morning on a fairly positive note for Sterling, after the Friday fall which was due to weak Retail Sales figures, which put a turn on the weekly strength.

The data suggested that higher inflation is starting to act as a bit of a headwind to consumer spending, which has been the primary driver of UK growth.

News from the US

The first point of note for the week is that itís a US bank holiday today which will affect liquidity, volatility and obviously any payments going there. Furthermore, the main noteworthy event on the macro calendar this week is the Fed minutes from their February FOMC meeting. However, given that since this meeting we’ve seen Yellen’s congressional testimony, which actually held quite a hawkish tone, the impact on the US dollar may be limited.

Euro data

Over in the Eurozone, the data schedule is dominated by survey data for February, including PMI figures and the German IFO. Overall though, we could see a bit of Euro support this week as the survey releases are likely to indicate on-going growth.

Data to come

Lastly, in terms of Sterling, the main release of note this week will be the second estimate of Q4 GDP which will give us the first look at the expenditure breakdown for growth within the fourth quarter. Unsurprisingly, any signs of a negative impact from Brexit in the data could cause problems for Sterling still.

Today we’ve got a very quiet day for macro data with the main focus being the ECOFIN meeting, the Eurozone’s broadest financial decision-making body, held in Brussels and where a range of financial issues is discussed such as euro support mechanisms and government finances.

European Commission projects expansion for UK

The European Commission has projected an expansion of 1.5% for the UK after initially suggesting just a 1% growth, seemingly backing the pound for 2017.

The European Commission has projected an expansion of 1.5% for the UK after initially suggesting just a 1% growth, seemingly backing the pound for 2017.

 

After initial fears of Brexit causing harm to growth in the UK, they have appeared to have back tracked and now state ‘growth has yet to be affected’. 2016 ended up being positive in terms of expansion, showing that the UK was the fastest growing G7 nation. But expectations have been kept at a steady 1.2% growth for 2018. Key data out in the UK today, with Consumer Price Index expected to come in just shy of 2%, with previous figures moving to 1.6%. Consumers are slowly beginning to feel the force of inflation, which has slowly been on the rise since Q4 of 2016.

The Greek banking situation has made its way back into the press, as bailout issues arise again. The BoG Governor, Mr Stournaras has stated that Greece requires another urgent bailout. With the Greeks beating its fiscal target set by IMF officials, it would appear they could be in line for a quick fix, but would need to keep to the agreement set out previously.

Marine Le Pen likely to win first round of voting

In other news, Marine Le Pen is likely to win the first round of voting in France and she has not been shy in stating she wants France out of the EU, now commonly known as a potential ‘Frexit’. All eyes will be on the how the National Front party performs in the upcoming elections.

Focus on German GDP

Today the market will be focussing on German Gross Domestic Product (1.7% expected against 1.8% forecast) & Consumer Price Index (1.9% expected & forecast) plus Italian Gross Domestic Product (1% expected against 1% forecast) in the spotlight.

All eyes on Donald Trump

All eyes will be on Donald Trump over the next few weeks, after he stated he will be making a big announcement with regards to tax. The announcement had moved US indexes up suddenly, as investors await the breaking news. The end of the day sees Federal Reserve’s Janet Yellen speaking before a Senate Banking Panel, which could feed into market movements.

Bank of England expects UK economy to grow by 2%

Mark Carney has dramatically upgraded growth forecasts for the UK.

Mark Carney has dramatically upgraded growth forecasts for the UK.

This comes as the BoE revised growth forecasts significantly while keeping their inflation forecast unchanged. Fears of the bank leaving London post-Brexit have also now been dismissed.

The Bank of England expects the UK economy to grow by 2% this year, up from its previous forecast of 1.4% in November. 2018 and 2019 forecasts have also been increased by 0.1% each year and the unemployment rate could potentially fall to 4.5%, down from a previous estimate of 5%. The upgrade to growth prospects comes after strong consumer spending forecasts were attributed to a weaker currency.

However, the Bank has been cautious as it admitted there have been problems in assessing how Brexit and Trump will impact the local and global economy. Despite the upward revision for growth, investors sold off sterling as they were left disappointed by Mark Carney’s cautiousness with regards to Brexit as he said the journey has just started.

Wise Money market news

Itís time to look forward to the weekend and itís the first Friday of the month, Non-farm payrolls remain the main focus of the day. Over the past three months, Non-farm payrolls increased steadily with an average of 165K new jobs created. Todayís number is expected at 180k with the market unemployment rate to hold steady at 4.7% and average weekly earnings to rise +0.3% mom. The expectation for a strong number today is reinforced by jobless claims earlier totalling less than expected this week, a pickup in non-farm productivity and drop in layoffs

Data to come

We will start to receive data from Europe this morning, including January PMIís, where weíll get the final revisions to services and composite readings for the Euro area. Germany, France and the UK will also publish services readings. The Euro area will see retail sales numbers for December released.

In the US all eyes will be on the January employment report and, of course, the nonfarm payrolls. The payrolls will not be the only main focus as services and composite PMI revisions will be released in the US, while the ISM non-manufacturing reading for January and factory orders in December will also be seen.

US FOMC meeting takes focus

Today’s main focus will be on the US FOMC meeting which will occur in the evening.

Today's main focus will be on the US FOMC meeting which will occur in the evening.

It is expected that the FOMC will not move interest rates but the market will be scrutinising the accompanying statement for clues on future moves. The FOMC will still be adjusting to incoming President Trump and will await clarification on his fiscal policy. Ahead of the meeting, we will get January’s ISM Manufacturing data, which should show a slight improvement.

Potential devaluation of the dollar

The immediate impact of Trump has been geared towards protectionism and a tougher immigration stance which is driving a risk off tone. Yesterday’s comments from the Trump administration accused Germany of benefiting from a ‘grossly undervalued’ exchange rate which led to euro gains versus the USD. This suggests that the US under Trump may seek to devalue the USD.

Sharp dive for Sterling

Yesterday, Sterling took a sharp dive in early trading as the formal process of passing a bill to trigger article 50 in parliament commenced. Volatility in the pound is likely to continue as we move closer to trigger date and surrounding Brexit related news. Today, we are expecting some hard data to review with the UK Manufacturing PMI.

Inflation closely watched in the Eurozone

Yesterday Euro HICP inflation data came in slightly stronger than expected, however, core inflation remains under 1%. The European Central Bank suggest that they will continue to look through any higher inflation for now, as the underlying trend is still relatively weak and attributable to temporary factors. Today, we will also review the euro area Manufacturing PMI.

Donald Trump’s travel ban leads to investor concerns

Donald Trump’s travel ban has led to investors moving into other safe havens, with JPY and Gold being the short term winners.

Donald Trump's travel ban has led to investors moving into other safe havens, with JPY and Gold being the short term winners.

Business leaders from across the world have voiced their opinions and now Theresa May has come into the firing line for not overly condemning his latest actions. She has since stated she looks forward to welcoming the new President of the US, which has seen a petition to ban him reaching 1.5 million signatures. Seven Muslim majority countries have been banned from entering the US for a short term period, but similar countries who have had dealings with Trumpís own businesses appear to be have been green lighted to travel freely.

Lobby group sees Brexit as golden opportunity to boost trade

City UK Lobby Group has stated it sees Brexit as a golden opportunity to boost trade and investment in the coming years, having previously voted and campaigned to remain in the EU. Such positivity will no doubt back the UK Prime Ministers corner, as she seeks to get clarity from the Supreme Court soon.

German inflation almost touches 2%

Yesterday, German inflation almost touched 2%, the key indicator level which ECB yearns for. This could put more pressure on Mario Draghi to think about tightening the current Monetary Policy. Germanyís economists are keen for the ECB to cut the QE programme soon, but other countries are still undecided.

Big day in terms of key note speakers

Big day in terms of key note speakers and particularly data, with the Bank of Japan stating its Monetary Policy Statement in the early hours of Asian trading. The German unemployment rate is being seen as the main piece of data today with forecasts expected to remain at 6% whilst Eurozone Consumer Price Index and Gross Domestic Product are also out today. The UK has its Mortgage Approvals numbers for viewing alongside Net Consumer Credit. Canadian Gross Domestic Product and US Consumer Confidence finish a busy day for the FX markets.