Market News & Insights
11 January 2017

GBP May Get a Lift today

The weaker pound continues to help support demand for UK assets as the FTSE once again pressed to record highs while across the rest of Europe modest gains were seen in major indices, but certainly nothing to get excited about with the STOXX 600, CAC and DAX trading .1%, .0% and .2% respectively. In the US we saw the NASDAQ hit record highs once more as demand for Tech stocks outweighs the rest of Wall Street with the S&P closing the day flat while the Dow suffered losses on the day.

It was a similar non-event day across currencies, the USD was under pressure for much of the day but those losses were erased into the close of the US Session, the USD index closing the day just slightly higher by the close of play. GBP weakness that had dominated the start of the week subsided, EURGBP fell over 1% from its highs, posted around .8764 at yesterday’s European open, while GBPUSD bounced off lows just above 1.2100 to finish the day just slightly higher, up over .5% from the lows. EURUSD consolidated between 1.0500 and 1.0630, the closing range to last week’s action and we wouldn’t expect too much change from that today. Overnight there were modest gains in the Asian session but all eyes are forward to today’s press conference from president elect Trump, due later in the day and we will be looking for a little more out of today’s session as a result.

There is a whole host of data due from the UK today and this may well provide sterling with a boost as the UK data has continued to outshine expectations, while BOE governor Mark Carney is also due to be active as he testifies in front of the Parliaments Treasury Select Committee. Trade balance data, industrial and manufacturing production figures and the NIESR GDP estimate all cross the wires for the UK today. All data points are expected to show signs of improvements while in parliament, Mark Carney will no doubt face some tough questions around surging inflation, and quite potentially why this would not warrant tightening from the BOE. Once again there will likely be criticism levied at the extent of forecasts around Brexit, but again we reiterate that the UK has not come close to feeling any impact from Brexit yet, as it stands the UK remains a member of the EU and its related benefits, while also benefiting from record low interest rates, 20% depreciation of the currency and a QE program from the BOE. There’s no reason why the data shouldn’t be good for now, and until Article 50 suggest otherwise, its business as usual for many. GBPUSD setting up a firm base now between 1.2080/1.2100 area, while upside for now likely limited as sellers lines up towards 1.2300 initially, while any move above 1.2500 will likely see sellers re-emerge again.