Ben Robson – The Week of 11th-15th March 2019

On the whole, last week’s data was fairly disappointing on most fronts. In Australia, GDP failed to meet analysts’ expectations- a 4th quarter print of just 0.2% bringing the yearly figure to 2.3%, had Australian banking analysts calling for the Reserve Bank of Australia to cut interest rates this year.

The Australian dollar traded down to the 0.7000 level versus the USD before recovering slightly towards the end of the week. In Canada, tepid manufacturing PMI and labour productivity statistics kept the Canadian dollar on the back foot. Both Australia and Canada kept interest rates on hold as did the European Central Bank which pushed out its forecast for raising European Interest rates to 2020 and announced a new batch of Targeted Long-Term Refinance Operations to be launched in September. Needless to say, the Euro suffered.

As too did the British Pound; with prolonged Brexit negotiations still leading nowhere, a deadline to leave the EU looming and “no-deal” not yet off the table, GBP had a tough week, weakening about 2% against the USD. Data in the US was pretty good until Friday when Non- Farm payrolls shocked the market coming in at just 20,000 versus expectations of 180,000.

Despite this, the unemployment rate improved to just 3.8% and average earnings increased. ADP payrolls on Wednesday read +183,000 so it may be worth committing this to memory and to expect a rather better Non- Farm payrolls print in April.

To this week and the main economic information to look forward to is from the US as we await a delayed retail sales number, inflation figures, durable goods data and a University of Michigan Consumer sentiment Index.

In the UK, Parliament will hold another “meaningful“ vote on Brexit and in Japan, the Central Bank releases its interest rate announcement.

Next week the Federal Open Market Committee of the US will announce its interest rate decision on 20th March and it’s virtually 100% sure that the Fed will leave rates on hold. Last week’s payrolls data is a metric that the FOMC studies and along with Retail Sales (out this Monday) expected at -0.1% for the month of January, Consumer Price Index Inflation (Tuesday) expected at 1.6% Y/Y for February and Durable Goods (Wednesday) expected at -0.5% for January the Fed has more than enough room to keep rates at the 2.25-2.5% level.

The University of Michigan Consumer Sentiment Index (Friday) is expected to improve to 95.6 from last month’s 93.8. Business and Consumer sentiment in the US remain high despite rather benign inflationary data. The 3-month average for payrolls at 186,000 is also impressive.

The British pound could suffer again this week as Brexit negotiations look set to continue right until 29 March, with a large dose of intransigence in Europe with respect to altering the deal. What’s clear is that the UK is ill-prepared for a “no-deal.” British Prime Minister Theresa May will almost certainly suffer another ignominious defeat in the UK’s House of Commons this week (Tuesday) as she tries to get cross-party support her deal.

What we see from the outside is more of the same politicking from within the UK and abroad. Uncertainty is not good for the pound. If “no-deal” is truly taken off the table and there is movement on the “backstop” issue then this may be seen as positive for Sterling.

The Bank of Japan announces its interest rate decision early on Friday morning and this is expected to remain on hold at negative 0.1%. One of the few highlights of last week was Japanese GDP which beat expectations at 1.9% annualized. The Japanese Yen strengthened as a result.

Good luck and good trading! Ben Robson

 

 

 

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