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Global Market Watch - 23rd February 2018

GBP
UK GDP was a disappointment as it fell to +0.4% from +0.5% and showed the UK economy slowing amidst concerns over Brexit. On the Brexit front Prime Minister May and her team seem to be in climb down mode as news emerges that the idea of “managed divergence” for a new trade deal was rejected by the EU even before it was agreed Cabinet policy. Also, the EU’s insistence that any EU citizen arriving in the UK before the end of the transition period can stay permanently if they wish appears to also being accepted after initially being rejected by the Prime Minister. Labour leader Corbyn will outline his vision for Brexit next Monday and Theresa May will follow next Friday.

Euro
German IFO business sentiment for February was below expectations of 117 coming in at 115.4 although the Single currency bounced nicely after being sold off from the FOMC meeting minutes. This move also came despite the ECB meeting minutes showing that the ECB was still concerned about the low rate of inflation. German final GDP has been released already at +0.6% as expected and we have Eurozone Final Core CPI to be released at 10:00 AM UK time, we expect 1.0%. The result of the SPD vote on the “Grand coalition” deal will be announced on the same date as the Italian election, March 4th.

US Dollar
The Dollar was soft in early US trading as the US equity markets bounced higher before Fed’s Kaplan said three rate hikes this year was “reasonable.” However, the US bond market has not seen such a strong consistent rise in US yields since 1994 and this is currently supporting the Greenback. New York Fed president Dudley will talk in London afternoon trading.

RoW
In Australia the Deputy Prime Minister Joyce has resigned after his philandering although this event still maintains the government’s majority of 1 in parliament. Canadian core retail sales fell 1.8% after last month’s rise of 1.7% so all in all pretty much a flat result over the two months combined although the CAD did slip in US trading. We have Canadian CPI for release this afternoon and expect +0.4% after January’s fall of -0.4%. New Zealand retail sales were an excellent +1.7% QoQ but had little effect as the NZD slipped.

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