Macro Commentary

Some tangible progress on the US-China trade negotiations has boosted market optimism, with US stocks posting record highs this week. Some decent US earnings figures have added to the positive sentiment.

In the UK, further negative comments from Bank of England officials have driven the probability of a rate cut at the end of this month to 60%, according to the latest Bloomberg survey.

On the data front, UK house prices showed an annual rise of 2.2%, gaining a boost from the Conservatives’ election victory.

Inflation meanwhile, slowed to 1.3%, its lowest level in three years.

Critical data due out next week will likely decide the Bank of England’s actions at the 30th January meeting.

On the exchanges, sterling dropped below 1.3000 against the dollar earlier this week on the increased chances of a UK rate cut, but again we saw consistent demand below that psychological level.

GBP/EUR dropped to the lower end of our 1.1650 – 1.1850 range where we saw some decent buying interest as expected. Conviction levels remain low ahead of the Bank meeting.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
21/1/20 UK Average Weekly Earns. 3M/YoY 3.2%  3.1%
21/1/20 UK Unemployment Rate 3.8%  3.8%
22/1/20 UK Public Sector Net Borrowing £4.9b £4.6b
23/1/20 EU ECB Deposit Facility Rate -0.50% -0.50%
24/1/20 UK Markit/CIPS Servies PMI 50.0 50.8
24/1/20 UK Markit Manufacturing PMI SA 47.5 48.5
24/1/20 UK Markit/CIPS Composite PMI 49.3 50.3

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7649 +1.40%
S&P 3316 +2.66%
EUROSTOXX 3802 +1.52%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1135 AUD/USD 0.6905
GBP/USD 1.3100 USD/AED 3.6730
GBP/EUR 1.1760 GBP/AED 4.8100
USD/CHF 0.9650 EUR/AED 4.0905
USD/JPY 110.20 XAU/USD 1554

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.72375% 2 year 0.65%
6 month 0.76350% 3 year 0.6%
12 month 0.81963% 5 year 0.72%


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