Draghi in the spotlight today


Yesterday was a quiet day in markets. I’m not quite sure whether that has anything to do with all of our Australian and New Zealand friends having the day off to celebrate Anzac day, but you never know.

Latest Rates
1.1444 1.8415 1.7886 1.3701
152.24 10.9255 17.2650 1.2169 0.8738
Investec currency forecasts as at 7 March 2018
Q1'18 Q2'18 Q3'18 Q4'18
GBP/USD 1.40 1.38 1.39 1.40
GBP/EUR 1.14 1.15 1.15 1.15
Data releases
11:00 UK CBI data
12:45 EZ ECB Decision
13:30 EZ Draghi press conference
13:30 US Initial Jobless Claims, US Durable Goods Data 
Key Levels
1.3712 1.4110
1.1376 1.1600

Market overview

Yesterday was a quiet day in markets. I’m not quite sure whether that has anything to do with all of our Australian and New Zealand friends having the day off to celebrate Anzac day, but you never know. We may have to get our FX structures and economists to keep an eye on the correlation next year!

What we do know is that this week UK government borrowing fell to levels last seen before the financial crisis and that this news had the Chancellor of the Exchequer Philip Hammond in a rather buoyant mood. Hammond told the Treasury Select Committee that he was “very satisfied with the trajectory we’ve seen,” and that the economy is “moving in the right direction.” With this in mind it therefore remains his ambition to return the budget to balance by the middle of the 2020s.

In case you missed some of the headline figures, Public-Sector net borrowing fell to £42.6 billion in the fiscal year through to March 2018, the lowest in 11 years and has helped halt Sterling’s slide. It showed that Britain is no longer borrowing to finance its day-to-day spending for the first time in 16 years and the overall figure was £2.6 billion lower than the OBR predicted last month.

The dollar is broadly stronger Wednesday morning in New York, with gains against every major currency, as U.S. 10Y yields break through 3.0% to trade near 3.03%. 2Y yields are up another 2.9bps, trading at the highest levels since August 2008. In other news, Sky News reported that President Trump is expected to visit the UK for a working visit possibly in July. I wonder whether this might have anything to do with the Macron-Trump ‘bromance’ that’s developed, as Trump rides the wave of friendship after the UK and France backed his efforts in Syria. I am sure we will hear a lot more about his visit in the weeks to come.

The day ahead

Looking at the data calendar today we have a busy day with the ECB taking centre stage at 12.45 when their policy announcement is due. The market expects neither any change in interest rates nor the pace of asset purchases; investors will keep an eye for any sign that officials are preparing a shift in stimulus plans for their June meeting. Mario Draghi’s comments in the press conference will no doubt be scrutinised as he may reiterate a prudent approach toward ending bond purchases while reaffirming a positive outlook for the region’s economy. This morning German Consumer Confidence came in in line with expectations, some respite after disappointing IFO data earlier in the week. Stateside, Durable Goods, Jobless Claims and Wholesale Inventories are the pick of a host of the 13.30 releases. At home, analysts will be keeping an eye on the CBI data at 11.00am and 09.30 when we hear from BOE’s Alex Brasier and get an update on Loans for housing data.

Thought of the day

Is there anything better in sports than a last minute winner, particularly in front of a home crowd? We’re normally thinking about injury time winners, tries after the 80 minute mark, or a great knock on the last ball but last night Lebron James, the basketball legend, made an epic shot to win a great playoff game for his team. He released the ball with a second left and just a split second after the buzzer went to signal the end of the game, the ball fell through the hoop. It really was hair-raising stuff and just a tremendous sporting moment. Search ‘Lebron James buzzer beater’ on YouTube and you’ll be able to see it. Though this was a great last minute play, in the FX markets, things aren’t always best left to the very end. Giving your business visibility and certainty in regards your future currency exposure is worth thinking about so give our dealing desk a call on 0800 055 6339 if you’d like to pick up that conversation.

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