The calm before the storm

18 February, 2016

Simon Eastman

Wednesday was a good day for the pound as inflation came out as expected at 0.3 percent. This was despite various variations of retail and consumer price indices being announced, many of which came in wildly under expectations along with poor retail sales missing the mark at -0.7 percent compared to expected -0.6 percent, sterling rallied gaining a cent against the Euro and nearly a cent against the US dollar. This was an unexpected reprieve for the pound which took a beating on Tuesday especially ahead of the meeting today where EU ministers pass judgement on the UK’s proposals for staying part of the EU.

The German ZEW economic sentiment survey coming out much lower than expected probably helped the pounds gains as it came in at 52.3 which is a lot closer to the magic number of 50 which is the benchmark between positive (above) and negative (below) thinking on how the economy is fairing. The EU as a hole’s figure came out above expectations but being so low, at 13.6 it has little bearing on investor sentiment.

Against the US dollar, the pounds gains came following the manufacturing data from New York which posted an even bigger negative number than forecasters expected coming in at -16.64 compared to -10. Having seen the pounds early morning gains lost before lunch, this figure gave the push to take it all back again allowing sterling to finish the day’s trade a cent up on the greenback.

So apart from the meeting in Brussels’ which could dramatically affect the pound should ministers muddy the proposals from David Cameron, making a referendum on leaving more likely, we also have a non-policy ECB meeting, UK unemployment and average earnings figures at 9.30am, a Swiss ZEW economic sentiment survey at 10am and inflation figures for the US ahead of the all important FOMC minutes at 7pm shedding light on the Feds future thinking on interest rates in the States.

A big day ahead for the markets for sure, so anyone with a transfer to make, be sure to get in touch with one of the Currency Index team today for some friendly guidance.