President Trump again attacked the Federal Reserve with comments that interest rates had been pushed to high and subsequently not cut fast enough.
The dollar held steady on Tuesday as the Euro failed to capitalise on initial gains following stronger German business confidence data.
Global equities edged lower on Tuesday, although selling pressure was limited with a solid rebound later in Asia on Wednesday.
The yen and Swiss franc retreated slightly on Wednesday as coronavirus fears were also contained. Sterling was supported by slightly stronger than expected labour-market data.
The German ZEW business confidence index strengthened to 26.7 for January from 10.7 previously which was above consensus forecasts of 15.0 and the highest reading since July 2015. The assessment of current conditions also improved on the month and the Euro-zone index strengthened to the highest level since February 2018.
After a positive tone on Monday, trade rhetoric was less favourable on Tuesday as President Trump stated that he is serious about auto tariffs on European cars if there is no trade deal.
The US Philadelphia Fed non-manufacturing survey increased slightly to 13.4 for January from 13.2 previously. All the main components edged stronger on the month with significant upward pressure on wages and companies were also more optimistic over the outlook.
President Trump again attacked the Federal Reserve with comments that interest rates had been pushed to high and subsequently not cut fast enough. Procedural wrangling over Trump’s Senate impeachment trial had no significant market impact.
The dollar was initially resilient even with Treasuries making net gains, but a further decline in yields had a significant impact later in US trading. Wall Street equities held marginal losses and USD/JPY dipped to the 109.80 area. There was mixed US-China trade rhetoric which had little overall market impact, although the yen maintained a stronger tone on the crosses.
UK unemployment held at 3.8% in the 3 months to November, in line with consensus forecasts, although there was a much larger than expected increase in employment of 208,000 and the claimant count increased by less than expected. Headline average earnings growth held at 3.2%, contrary to expectations of a small decline to 3.1%, while underlying growth met expectations at 3.4% from 3.5% previously.
The data overall offered some reassurance even though labour-market data is a lagging indicator and Sterling regained ground following the release. Futures markets indicated that the chances of an interest rate cut at next week’s policy meeting had dipped slightly to around 62% from 65%.
After edging back above 1.3000 GBP/USD pushed to highs around 1.3080 before fading while GBP/EUR rallied to test the 1.1790 support area. There was an element of caution ahead of Friday’s PMI business confidence data and there was also speculation that the EU would offer less favourable trade terms to the UK which maintained underlying Brexit concerns. Sterling, however, held steady on Wednesday with EUR/GBP just below 0.8500.
|08:00||World Economic Forum Annual Meetings||-||-|
|09:30||GBP Retail Sales ex-Fuel (M/M)(DEC, 2019)||0.70%||-0.60%|
|09:30||GBP Retail Sales ex-Fuel (Y/Y)(DEC, 2019)||2.90%||0.80%|
|09:30||GBP Retail Sales (Y/Y)(DEC, 2019)||2.60%||1.00%|
|09:30||GBP Retail Sales (M/M)(DEC, 2019)||0.50%||-0.60%|
|11:00||GBP CBI Industrial Trends Orders (JAN)||-||-28|
|13:30||USD Chicago Fed National Activity Index(DEC, 2019)||-||0.56|
|13:30||Bank of Canada Core CPI (Y/Y)(DEC, 2019)||-||1.90%|
|13:30||Bank of Canada Core CPI (M/M)(DEC, 2019)||-||-0.20%|
|13:30||CAD CPI (M/M)(DEC, 2019)||-0.10%||-0.10%|
|13:30||CAD CPI (Y/Y)(DEC, 2019)||2.20%||2.20%|
|13:30||CAD New Housing Price Index (M/M)(DEC, 2019)||-||-0.1|
|13:30||CAD Wholesale Sales (M/M)(NOV, 2019)||-||-1.10%|
|14:00||US House Price Index (M/M)(NOV, 2019)||-||0.20%|
|15:00||USD Existing Home Sales(DEC, 2019)||5.42M||5.35M|
|15:00||USD Existing Home Sales Change(JAN)||0.80%||-1.70%|
|15:00||CAD BoC Rate Decision||1.75%||1.75%|
|23:50||JPY Exports (Y/Y)(DEC, 2019)||-||-7.9|
|23:50||JPY Merchandise Trade Balance Total(DEC, 2019)||-369.0B||-85.2B|