Macro Commentary

UK data this week was generally positive, with annualised growth at a better than expected 1.1% and house prices up by the most since 2017, adding further evidence to a pick-up in economic activity since the election.

The Bank of England has been justified in holding rates and we do not expect any change in policy this year.

The US and European central banks are also expected to keep monetary policy on hold for the remainder of the year.

The equity markets have started the year on a positive note, and remains buoyant despite the negative effects of the Coronavirus.

Ongoing concerns on how the UK-EU trade negotiations will develop, do however continue to weigh on sentiment.

In the US, the focus is increasingly building on the November elections, with the Democrats in the process of selecting their candidate.

On the exchanges, sterling rallied strongly yesterday, whilst the Euro remains under pressure on further weak economic data.

GBP/USD continues to find demand around 1.2900, and we continue our strategy of buying on dips, with an initial target of 1.3250.

GBP/EUR continues to see strong buying interest on dips to 1.1700, with the market breaking through the pivotal 1.2000 level yesterday.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
18/2/20 UK Average Weekly Earns. 3M/YoY 3.2%  3.0%
18/2/20 UK Unemployment Rate 3.8%  3.8%
19/2/20 UK CPI YoY 1.3%  1.5%
19/2/20 UK RPI YoY 2.2%  2.5%
20/2/20 UK Retail Sales YoY 0.9%  0.6%
21/2/20 UK Markit/CIPS Services PMI 53.9 53.0
21/2/20 UK Markit Manufacturing PMI SA 50.0 49.8
21/2/20 UK Markit/CIPS Composite PMI 53.3 53.0
21/2/20 EU CPI YoY 1.4% 1.4%

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7427 -1.49%
S&P 3373 +4.43%
EUROSTOXX 3845 +2.69%
DFM GENERAL INDEX 2733 -1.12%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.0840 AUD/USD 0.6730
GBP/USD 1.3050 USD/AED 3.6730
GBP/EUR 1.2040 GBP/AED 4.7950
USD/CHF 0.9805 EUR/AED 3.9810
USD/JPY 109.80 XAU/USD 1576

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.75238% 2 year 0.72%
6 month 0.80575% 3 year 0.73%
12 month 0.88875% 5 year 0.74%

London

+44 (0)20 7012 2599
DG-FX@arbuthnot.co.uk

Dubai

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dubai@arbuthnot.co.uk

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