GBP: Market still prepping for a no-deal
Yesterday’s speech from Bank of England Governor, Mark Carney, was well rounded, focusing on both sides of the coin. A series of weekly Euro auctions and a direct Euro swap line have been created to help ensure UK banks don’t face any future liquidity problems. The current no-deal preparations will go some way to limiting the damage should the negotiations process grind to a halt. There have been further statements from the car maker industry, suggesting that they too will move operations if required. Sky News reported that there could be a complete reduction in tariffs for 80-90% of all goods in the wake of a no-deal.
Theresa May’s negotiations yesterday failed to progress but they are due to continue throughout today. We also have two Bank of England members speaking today at 12:15 and 17:30 GMT.
USD: ADP focus
At 13:15 GMT we have the Automated Data Process employment release which typically acts as a precursor to the Non-Farm data on Friday. However, the direct correlation month to month is not particularly convincing.
Trade balance data will be under more scrutiny than usual, as the trade deficit has grown by more than 100 billion USD under President Trump’s presidency, and we are nearing the conclusion of the US/China trade tariff war.
Non-manufacturing ISM data from yesterday showed a healthy increase in business activity and orders, suggesting that the economy is on track for 3% growth in Q1. The Federal Reserve’s President, Eric Rosengren, had made it clear that “several” further meetings would need to take place before any further action was taken on interest rates.
CAD: Interest rate decision
At 15:)0 GMT we have the Bank of Canada’s interest rate decision and statement. There is very little appetite across markets to see any change in their current programming. The previous meeting on 9th January made hints that the next policy move would be a rate hike, however, the US markets have completely priced out any rate changes over the next 12 months.
Central Bank members had believed that non-oil investments were prime to help lift the economy and that consumer confidence and spending would turn positive. Cash flow is not hitting the corporate books and anything extra is being piled into debt and foreign operations.
Have a great day.