It’s all about the Dollar Today

Daily Update - 21st December 2017

Yesterday’s Focus

• EUR Producer Price Index
• UK BoE Governor Carney Speech

Yesterday’s Explained

German November producer price inflation fell back to 2.5% year over year from 2.7% year over year in the previous month, with prices up 0.1% month over month. A slightly lower than anticipated number. Food price inflation decelerated markedly – to 3.4% year over year form 4.2% year over year, which helped to counterbalance an uptick in energy price inflation that saw annual heating prices rising 20.3% year over year. At 2.5% year over year, the rate remains clearly above the ECB’s objective for price stability, although the deceleration in the headline rate will give Draghi something to argue with.

As the euro and pound begin to grow stronger on the back of dollar weakness, we are likely to see the stock indexes in Europe on the backfoot and that is the kind of price action that we have been seeing in them over the last 24 hours. The PPI data from Germany came in a bit weaker and though this piece of data is not very important in the larger scheme of things, the effect of this weak data on the DAX has been large as the index was already under a bout of weakness during the course of the day.

 

Today’s Focus

• UK Gfk Consumer Confidence, Public Sector Net Borrowing
• BoJ Monetary Policy Statement, Interest Rate Decision, Press Conference
• US Initial Jobless Claims, US Gross Domestic Product

Today’s Explained

There are no material stats out of the Eurozone this morning to provide direction for the EUR, which has been on the front foot through the current week. It’s been more about the Dollar than any material shift in sentiment towards the Eurozone economy that has led to the upside in the EUR.

For the Pound, it’s another quiet day on the data front, with Brexit talks currently focused on the post March 2019 transition period for the UK to fully shift to the Brexit blueprint to be agreed upon. The EU has put a 21-month time limit on the transition period for now, while the government is looking for 24-months and businesses are asking for longer. While the markets may be more interested in how trade talks will progress, the fact that the two sides are not able to come to an agreement on relatively similar time frames is a concern.

Across the Pond, focus will be on the Oval Office and the tax reform bill, with the bill now waiting for the U.S President’s signature. We can expect plenty of fanfare over the signing, with the U.S administration likely to parade the success in finally delivering one of its election campaign pledges.

Economic data out of the U.S will also be a factor today, with 3rd estimate GDP numbers for the 3rd quarter and December’s Philly FED Manufacturing Index numbers scheduled for release.

For the Loonie, it’s a busy day on the calendar, with key stats scheduled for release this afternoon including ADP nonfarm employment change and inflation figures for November, together with October retail sales data.