By Nick Harrison
US President Donald Trump started the week off by imposing trade tariffs on Canada & Mexico assuming they didn’t secure their borders to prevent illegal immigration and drug trafficking. The 2 neighbouring countries quickly did as they were told and mobilised thousands of troops as per Trump’s wishes. Trump’s heavy handed negotiating certainly seemed to have paid dividends initially, but the EU and China are proving to be a different story. The EU have threatened to strike back with their own tariffs within “an hour” of US action and China have now said they will implement their tariffs on US oil, gas, coal and some vehicles on February 10th. While this hasn’t yet affected the FX market, global economic panic can easily set in to investors minds and the ongoing trade war could see plenty of volatility in how the Pound, Euro & US Dollar are traded, so watch this space as Trump’s aggressive new policies play out.
The focus remains on the US today as we see data releases in the Services and Employment sectors. The ADP Non-Farm Payrolls release comes out at 1.15pm this afternoon and is the pre-cursor to the main Non-Farm Payrolls data on Friday. While this figure is unlikely to rock the market, the ISM Services PMI released at 3pm might see investors turn their eye to the US Dollar. A figure of over 50.0 indicates industry expansion, below indicates contraction. The figure is a leading indicator of economic health – businesses react quickly to market conditions and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy, so watch out for possible market movement from this figure later.
Tomorrow, the Bank Of England’s Monetary Policy Committee has been forecasted to cut its interest rate for the first time since November last year. The current rate sits at 4.75% and the forecast indicates a cut of 25 basis points to 4.5%. Inflationary pressures have been quite high in the UK over the last couple of years and this has caused the MPC to pause their rate cutting policy after they were expected to make cuts last year. It now seems the way is paved for the MPC to ease their policy and help economic growth return to the UK after a stagnant previous few months. Anything outside of the forecast will surely see some market volatility and the 9 members’ votes will also be scrutinised. The Bank Of England’s Governor Andrew Bailey will be making his post -MPC speech tomorrow night, so let’s see what rhetoric he provides to the market.
As previously mentioned, the week finishes on Friday with the release of the US Non-Farm Payrolls. The FX market has always followed this figure keenly and we could see some market movement after this data release. Job creation is an important leading indicator of consumer spending which accounts for a majority of overall economic activity in that country, so let’s see how the week plays out with this final data release.
As always, our Currency Consultants are ready to share this information with you to help you make informed decisions about your foreign currency strategies. See below for the remaining data releases this week.
WEDNESDAY
1.15pm US ADP-Non Farm Employment Change
3pm US ISM Services PMI
THURSDAY
12pm UK Bank Of England Interest Rate Decision and Vote
1.30pm US Unemployment Claims
9.05pm Bank Of England’s Governor Bailey Speaks
FRIDAY
1.30pm US Average Hourly Earnings
1.30pm US Non-Farm Payrolls 1.30pm US Unemployment Rate