Market Brief: mixed bag of US data

19 Feb 2018

Sana Hanassi-Savari

Dealing team

We saw a mixed bag of figures out of the US yesterday afternoon which saw GBPUSD gain strength to end the day just shy of $1.41.

Today's data releases
  Key levels
09:30 UK retail sales      
13:30 US housing starts   Support Resistance
15:00 US Michigan consumer sentiment GBP/USD 1.4000 1.4285
15:00 May and Merkel hold Brexit talks GBP/EUR 1.1159 1.1542

Market overview

The main focus was on the PPI figures given current market concerns over rising inflation. These showed that the headline input prices figure had picked up to 0.4% month on month in January after a flat reading in December, as anticipated, largely due to the recent rise in oil prices. However, the core measure (i.e. excluding fuel and energy) beat expectations by similarly firming to 0.4% mom (consensus 0.2%). As such, this could signal that underlying pipeline inflationary pressures are stronger, which may push up on the consumer CPI inflation figures later this year. Meanwhile, the regular jobless claims print was broadly in line with expectations, rising to 230k (consensus 228k) in the week to February 10 from a near 45-year low of 223k previously. In terms of the manufacturing surveys, it was a case of opposites with the New York Fed’s Empire State survey surprisingly easing to 13.1 (consensus 18.0) from 17.7 previously, contrasting with the Philadelphia Fed’s survey climbing to 25.8 (consensus 21.6) from 22.2.
 
UK Prime minister May will travel to Berlin to meet Chancellor Angela Merkel in an effort to make progress on Brexit negotiations Britain is increasingly under pressure to define what they want from the final relationship with the EU. Tomorrow, Mrs May is due to give a speech where she is expected to set out the UK’s view on the ongoing “security partnership” with Europe and comes after Boris Johnson spoke on Wednesday in an attempt to unite the UK behind his vision of a “liberal vision”. The most pressing matters surrounding the Irish border and the transition phase are causing plenty of headaches to those involved and come as we are fast approaching the one year to go mark on the 29th March.
 
Cyril Ramaphosa was officially sworn in yesterday as President of South Africa after the late night resignation of Jacob Zuma. This finally brings an end to the weeks-long power struggle in the governing ANC party. The Johannesburg stock market surged more than 3% and the Rand hit a near three year high against the dollar as markets became hopeful that the new President would be able to bring the struggling economy back on track. 

 

The day ahead

Today sees the January figures released for UK retail sales. The December number slid following a strong 1% mom gain in November but this likely reflects the difficulty in seasonally adjusting for Black Friday. Even so, the ongoing squeeze on real household finances meant that underlying retail sales growth was also relatively subdued. We have a few more US data releases out this afternoon with the most important being the Michigan sentiment figure for February.
 

Thought of the day

After nine years in power, Jacob Zuma has finally succumbed to his party’s pressure to resign and ended his scandal-hit time in office. Even though the ANC had demanded he step down earlier in the week, Zuma had held on before eventually announcing his departure in a televised address last night. The 75 year old has been a member of the ANC for most of his life, rising through the ranks to become leader of the country for more than a third of the time after apartheid. He was a prominent member of the anti-apartheid struggle and was imprisoned alongside Nelson Mandela in the 1960s. The Rand continued its recent positive streak further strengthening, although moderately, to its highest level against the dollar since Feb 2015. There is plenty more news to watch out for from South Africa including a potential cabinet reshuffle from expected new President Ramaphosa and a Moody’s rating announcement in March. For a view from our trading desk on what to look out for, give your Investec Dealer a call on 0800 055 6339.

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