Thursday 22 March 2018

Markets daily top three for Tuesday


Hugh McGovern

NY Fed Empire Manufacturing Index disappoints, new highs for the EURGBP and inflation data preview UK & US.

EURGBP starts the week where it left off with fresh new highs

EURGBP broke 0.87 for the first time since July 2013 as uncertainty around the timing of the triggering of Article 50 continues to build. A spokesman for Theresa May said that the Article 50 notification wouldn’t happen before the end of 2016, while the Sunday Times reported that senior figures in the City of London have been privately warned that the formal exit could be delayed until the end of 2019. Prolonged uncertainty around the formal exit has seen GBP assets continue to come under pressure this week. 0.8765 was the high in July and August in 2013 so this is likely to provide the major initial resistance in what is a busy week of releases for the UK. GBPUSD traded as low as 1.2870 yesterday.

NY Fed Empire Manufacturing Index disappoints

Manufacturing conditions weakened in the New York region in August according to the NY Fed’s Empire Manufacturing Index which fell to -4.2 in August, down from +0.6 in July. The Empire index was the first in a series of manufacturing data releases in the States this week. The Philly Fed Index is released on Thursday where the market is expecting an improvement to 2.0 in August from the -2.9 in July.  Industrial production numbers for July are out at 2.15pm today where the market is expecting an increase of as much as 0.8% on the month. EURUSD reached 1.1248 early this morning. The Fed release the minutes from their latest meeting  tomorrow evening , which will provide the latest insight into how the committee members feel about the outlook of the US economy.

Inflation data preview: UK & US

Inflation data from the UK and the US will be the main point of focus today. The Consumer Price Index (CPI) in the UK is out at 9.30am where our colleagues in RBS expect the year on year rate to fall to 1.2% from 1.4%. The impact of GBP’s deprecation may begin to appear in the numbers soon, which is something the Bank of England are acutely aware of as they highlighted in their August Inflation Report at the beginning of the month. In the US, the CPI has been relatively robust over the last number of months, mainly due to higher energy prices and a strong core rate. The market is expecting this trend to continue and for today’s numbers to be mostly unchanged from June’s 0.2%. While it's another quiet week for the Eurozone in terms of data releases, we get German ZEW Surveys released today where a modest improvement is expected on the month as European business sentiment has been relatively resilient, so far, post Brexit.

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