Brexit good news- Boris Johnson believes in good deal to access the single market

Foreign Secretary Boris Johnson believes that Brexit will be a good deal to access the single market. Foreign Secretary Boris Johnson believes that Brexit will be a good deal to access the single market.

After a steady flow of positive data in the UK, Foreign Secretary Boris Johnson, suggested anti-Brexit campaigners have got it wrong.

Standing in front of a select Foreign Affairs committee, he said that the EU would be wrong to ‘punish’ the UK for leaving, also commenting that Brits will still drink champagne and be the biggest importer of German cars than any other.

It’s his belief that the UK will get a good deal regarding access to the single market, whilst gaining freer access to the global market.

There’s good news for rent payers, as the rate of rent increase grew at its slowest pace in September this year, thanks to the decision of landlords to absorb the growing tax rates rather than pass them onto already high-paying renters.

With a tax reduction in buy to let properties expected in April 2017, landlords seem to have decided to let the slight increase slide, keeping tenants happier as new contracts currently average just over £900 per month. In London, the cost actually fell 0.8% which will no doubt be good news for those looking to move in the city.

Janet Yellen rounds up the week at Boston conference

After a thin day of data yesterday and slight GBP fightback, today’s US Advanced Retail Sales & the University of Michigan Confidence report are the key pieces of data available, whilst Janet Yellen finalises the weeks trading with a conference in Boston.

Euro tumbles following the Italian election

In an explosive day for wise money markets, the single European currency was the worst performer of the majors.Euro tumbles following the Italian electionAt the start of the session, the euro opened the week on a fairly solid start, but that quickly faded as headlines grew on the Italian election.

The initial euro rally was a reaction to a solid win for a pro-austerity, pro-euro Nicos Anastasiades as the Cypriot president.

Although not a resolution to the issues the small island-nation faces it does relieve it as an instant danger.

Next on the agenda is the far more critical Italian election.

The likelihood of a clear victory for an individual party never really seemed to develop but there was some cautious expectation that a pro-euro coalition could be created.

Early counts proved that would not be possible and led to a no clear winner which forces either a grand coalition or a re-election.

Additionally, the anti-austerity groups appeared to gain significant momentum – voters clearly displaying their frustration over a deepening recession. A full resolution to Italy’s election issues may not be resolved up for a few weeks.

In the meantime, speculators will start to worry over the renewed fear of fiscal tension in the Euro-area will do to bond yields. If the debt markets dry up, the ECB may have to reverse its contracting balance sheet.

Sterling opened the week with a prominent, 34-pip gap to the downside. Other sterling-based crosses produced bigger discrepancies during the on the opening of official trade yesterday.

The piercing move lower was the first chance for many to respond to the Moody’s rating agency’s downgrade of the United Kingdom’s AAA-rating late Friday evening. This downgrade certainly dents Prime Minister Cameron’s effort to balance his austerity push while warding off recession.

Today we should note an Italian bond auction in the early morning session where €8.75 billion of 6 month debt is on offer and this afternoon we have US Consumer confidence for the month of February where a reading of 62 is expected.

Sterling could dominate the headlines tomorrow morning with a GDP number due tomorrow morning expected to show 0% YOY and -0.3% for the for the Quarter.

Britain loses its AAA credit rating

After a difficult fall for Sterling after dovish BoE minutes were released the Pound started to strengthen on weaker than expected LTRO payments and an impending Italian election in the euroland.Britain loses its AAA credit ratingThen came the downgrade to the U.K.’s credit rating, from AAA to AA1 from Moody’s, during Friday’s trading session to spark another run on Sterling with the currency losing all gains against it major trading partners.

GBP/EUR stalled at 1.16 during the week and finished in the 1.14’s, with EUR/USD struggling to stay above 1.31 after a small range traded week and GBP/USD going as low as 1.5131.

A poor end to the week has spelled a difficult start during Asian trade for Sterling as the currency continues to struggle.

Chancellor George Osborne testifies about Banking Standards today to parliament with curve ball’s about the recent downgrade expected which will give him plenty to think about for his next statement in March.

Wednesday’s adjusted GDP figure is expected to remain at -0.3% in line with preliminary data from earlier in the month.

Over in the uS of A- after continued strength last week, markets have a few things to note this week.

Tuesday, US New Home Sales are expected to continue their positive rise.

Wednesday, Durable goods orders expected to show minimal growth at 0.2% from 1% last month.

Pending Home sales also expected to show growth at 1.6% versus a contraction last month. Thursday, the Initial jobless claims figure is expected to show a minimal fall and the GDP figures is expected to come in at 0.5% versus contraction last quarter.

Friday, sees the final Michigan Consumer Sentiment figure and ISM manufacturing index.

In euroland- after last week’s euro strength on German business Sentiment, the Italian Election has bought fears back to the single currency as the possibility of disgraced ex-PM Silvio Berlusconi returning to power could become reality today and possibly undo the austerity measure put in place by currency Prime Minister Mario Monti.

The election will be closely watch throughout the day and Monday evening as speculation and results emerge to indicate who will take the reigns.

Sterling continues it’s devaluation

From the Bank of England’s perspective it’s been a very successful week.Sterling continues it's devaluationThe Bank indicated it wanted a lower exchange rate to ‘rebalance’ the UK economy and the market duly obliged, sending the Pound to multi-month lows across the markets.

Compounding the move was rumours of a credit rating downgrade by S&P & a slight increase in the ILO unemployment rate despite record numbers of people now in work within the UK.

The Federal Reserve minutes showed conflict between members, which the equity markets in particular did not like.

This month was the first hint the Fed gave about the withdrawal of stimulus (and it was nothing more than a hint that they were considering it) and it presents policy markets with rapidly changing macro outlook.

So much of recent risk gains have been fuelled by the prospect of unlimited easing and a slight change to the Fed policy will have large ramifications for asset prices in the future.

There is currently a disconnect between market prices and the underlying economy and that gap was being sustained by the prospect of unlimited QE.

Now we have the prospect of that not happening for as long as the market hoped and so that gap must begin to narrow.

Next week we can look forward to lots of US data including consumer confidence, durable goods orders & GDP.

German data including CPI and unemployment is also due and being increasingly scrutinised in light of the perceived slow down across the Euro zone.

Interestingly a rate cuts from the ECB this year is now being forecast which should help the Pound against the single currency.

Wise money markets fall out of love with Sterling

With today being St Valentine’s day it is clear that the wise money markets are not loving Sterling.Wise money markets fall out of love with SterlingThe Pound slumped once again in yesterdays trading following the Quarterly Inflation Report.

Although Mervyn King was upbeat in his view that the UK economy is on the path to growth (albeit slow and steady) it did not stop the Pound taking a beating against the euro and the US Dollar.

The Bank raised its inflation forecast which is now expected to remain over 2% for 2 years and made it clear that they are willing to tolerate higher inflation which they see as stubborn but temporary.

They noted that the recent fall in the Pound which has fallen over 6% against the Euro and over 4% against the USD has been a contributory factor in raising their inflation forecasts.

The Pound fell further on the news as the market does not see any monetary tightening on the horizon- in fact there is scope for more stimulus if required, although King did note that stimulus alone is not a panacea.

It has also been a bad morning for the euro against the USD after weaker than expected Q4 GDP data from France and Germany and Italy.

We have eurozone GDP as a whole at 10:00 GMT and currently the euro is on the back foot so we await this news with interest.

The Bank Of Japan left policy measures unchanged as expected with the decision coming after weaker than expected Q4 GDP data.

It was also revealed that the likely candidate for the next BOJ governor stated that the Japanese inflation target would not be attainable without further JPY weakness targeting 100.

The focus today will be on the G20 discussions in Moscow and in particular on the subject of currency wars.

It will be interesting to see if tomorrow we get a clarifying statement on exchange rates and associated monetary policy as the G7 comments have led to confusion on this matter.

The wise money focuses on Mark Carney Speech

Today is decision day for the Bank Of England and the European Central bank.The wise money focuses on Mark Carney SpeechIt is not expected that the Bank Of England will move on interest rates or QE and it is widely expected that the BoE will sit on their hands until Mark Carney assumes the governor post in July.

Today Mark Carney has an important testimony and it will be viewed very closely for any clues to future policy direction or changes to be introduced by the BoE post July.

Carney has previously suggested a focus on nominal GDP (NGDP) would be a better indicator to help steer monetary policy, this would lend to a more aggressively dovish approach which would continue to weigh on the pound if mentioned.

Yesterday, chancellor George Osborne voiced his frustration over the Bank Of England’s apparent reluctance to pursue further monetary easing at the present stage.

This is interesting as it shows the government is backing a more aggressively dovish BoE which is the expected direction that Mark Carney will take.

We also have the European Central Bank meeting and again no changes are expected.

It will be the post meeting press conference that will grab the attention and in particular whether Mario Draghi will voice concern over recent euro appreciation.

The gains in the euro have drawn a lot of attention recently and it will be interesting to gauge the ECB’s tolerance of this after the Greek finance minister raised concern over the strength of the euro.

We have just had UK industrial production and manufacturing data come in stronger than expected which is a welcome boost for the UK and the Pound.

This is also likely to further support the current mantra from the Bank Of England to keep calm and carry on in the short term.

Wise money markets look to interest rate decisions for further direction

Last week was another difficult week for Sterling with the currency continuing to show sustained weakness heading into the US Non-Farm Payroll figure.Wise money markets look to interest rate decisions for further directionThe number itself came in slightly worse then expected at 157k new jobs however on a more positive note, the ISM manufacturing Index came better than forecast at 53.1 compared to 50.6 expected.

The GBP/USD breached 1.58 briefly during the weak before finishing in the 1.57’s, GBP/EUR continued to slide breaking through and settling below 1.15 with EUR/USD continuing its climb briefly touching 1.3710 before closing in the high 1.36’s.

Today, we have UK construction PMI expected to show a slight contraction but has seen GBP/EUR rise.

On Tuesday the Services PMI is expected to show the UK is teetering on the edge of growth and contraction at around 49.8.

Thursday will see Mark Carney being questioned by Treasury Select Committee as he takes over from Mervyn King on July 1st.

Also on Thursday, we have UK trade Balance with interest rate decision and conference to finish a busy week.

On the other side of the pond after the Dollar weakened further against the euro last week we have a quiet start to February with most notable data release being on Thursday with initial and continuing jobless claims are both expected show small declines and ahead of Friday’s US trade balance likely to show their deficit has reduced by around $2 billion versus last month’s figure.

The Chinese CPI on Friday is expected to show inflation easing year on year to 2% to present further relief to squeezed consumers from the republic.

UK GDP number keeps wise money market guessing

This morning sees the release of the preliminary 4Q GDP number in the UK at 9.30am. UK GDP number keeps wise money market guessingIts fair to say the market is not expecting a surprise to the upside, with Sterling breaching new lows against the Dollar and Euro in the Asian session overnight.

However with the market so oversold if the GDP number does read significantly higher than consensus expectations you sense there is room for a 60-70 pip rally in the Pound.

But it’s a big if given the picture painted by recent data flow. It is the key data point today and will set the tone for Sterling trading for the next few days, whatever the number this morning.

In Europe this morning, and probably adding to Sterling’s woes, the ECB releases data for the early repayment of the 3-year LTRO money.

The news that major banks are paying back LTRO money early is very euro positive, at least in the near term since it marks a major turning point the euro crisis and reaffirms the recent mutterings of EU officials that the worst of the crisis is over.

Whether or not that is the case remains to be seen, but the currency markets will certainly lap up the positive sentiment should it be revealed at large number of banks repay money ahead of schedule.

US data is light on the ground today but new home sales are released later and are expected to show strong growth and continue to indicate a generalised pick up in the US housing sector. A very positive development indeed.

Sterling weak ahead of Cameron’s delayed referendum speech

Investors in Europe continue to remain optimistic on the shared currency as more positive data was out yesterday.Sterling weak ahead of Cameron’s delayed referendum speechThe currency still trades above the 1.33 mark against the Greenback after a successful Spanish bond auction, with bond yields dropping to 5.8% on 5 year government bonds coupled with a positive German ZEW economic sentiment number.

Mario Draghi, in his speech yesterday was upbeat that the worst is over for Europe, citing that the ‘darkest clouds’ have receded, as economic sentiment reached its highest level in over 2 years.

While the ECB expects the eurozone to contract by 0.3% in 2013, a gradual recovery is on the cards in the latter half of the year.

The Japanese Yen rose for the third day in a row against the US dollar, as US existing home sales unexpectedly dropped in December restrained by weak supply.

The BOJ has placed it’s inflation target at 2% yesterday and announced open ended asset purchases to commence in 2014.

The S&P 500 hit a fresh five year closing high, even though the US debt ceiling talks are the major point of concern for the global economy.

Meanwhile in the UK, economic data news goes from bad to worse, as figures revealed yesterday that government borrowing jumped again in December despite George Osborne’s efforts to bring it down.

ONS figures show that the deficit came in at £15.4 billion, up 3.8% as compared to the same month last year.This further fuels fears of a downgrade for the UK from it’s AAA rating.

The main focus in the region though is PM David Cameron’s EU referendum speech, where he is going to pledge that if elected for another term, he will let the public vote on whether to stay in or leave the European Union.

Sterling under the spotlight

Sterling is expected to show some resilience over the coming year specifically against the euro however we may see it struggle against the Greenback.Sterling under the spotlightThe chief threat to the Pound revolves around the UK economy as all indications suggest the UK economy has contracted in the final quarter of the year.

Ominously, a weaker external environment taken together with the comparative resilience of Sterling has caused in a worsening trade deficit, which could eventually impose pressure on the Pound.

In the near term we will focus on inflation data today and Bank of England minutes tomorrow for guidance price rises concerns and the split if any within the MPC.

This alongside eagerly anticipated retail sales data and GDP on Friday will shape Sterling’s performance this week

There were some signs of progress over fiscal cliff negotiations admittedly at slow pace yesterday.

Talks between President Obama and House speaker Boehner seemed to go fairly well but the probabilities of an agreement by year end remain unlikely.

Meanwhile US equities rallied as risk measures improved, overlooking the weaker than expected reading for the December Empire manufacturing survey.

Overnight the Reserve Bank of Australia attributed a softening labour market as the main driver for its latest 0.25% interest rate cut.

The central bank added that resource-sector investment was close to a high as the inflation view allowed scope for easier policy to support demand.

It now looks likely that further rate cut will take place in February.

Today there is little else in terms of significant impact with highlights including a vote on the Italian 2013 budget, UK inflation data and an interest rate decision in Sweden. The overall tone is likely to continue to be constructive for risk assets.