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GBP
Fundamental Analysis
(13th Feb): It is hard to judge how much of the GBP lows is related to Brexit uncertainties and how much is related to the economy data there. Traders are less likely to put a position before the CPI and Retails sales number comes out. We remain the neutral view on GBP as the currency is already at 3-week low.
(12th Feb): The 4Q GDP number came as 0.2% QoQ growth, which missed our expectation and market consensus. Services sector’s 0.4% positive growth is offset by production and construction’s relevant 1.1% and 0.3% contraction. Although the service industry struggles to deliver sound growth, business investment in Q4 dropped by 3.7% YoY for a fourth consecutive drop, which is also the largest decline since 2010 Q1. This has showcased that the Brexit uncertainties have cooled down investor’s willingness to invest. In the meantime, the economy is going to struggle and growth could be even weaker in the first three months of 2019 than it was at the tail end of 2018 if consumers really go into their shells. We remain neutral for GBP as the market has already sold it to 3-week low, waiting for any good news from the economy or the Brexit update.
(11th Feb): The latest PMIs pointed to UK growth stagnating at the start of the year, but in the last three months of 2018, the British economy probably managed a modest expansion of 0.2% q/q. The GDP report on Monday will be accompanied by a slew of other data, including industrial production and trade. Industrial and manufacturing output are both forecast to have returned to positive growth, rising by 0.2% m/m each in December.
Our house view is that GDP growth in the fourth quarter can be slightly beat the 0.2% market expectation but still way below previous quarter’s 0.6% q/q as the IHS Markit/CIPS UK Services PMI of Dec expanded well to 51.2, beating the 50.7 market expectation and service industry makes 80% of the GDP. The data can provide weak support for GBP as a moderate beat of consensus will not be strong enough to ease off the worries that Brexit coinciding with a global economic slowdown could further sink British markets.
The pound could be in line for some small gains if the data surprises mostly to the upside, especially after the BoE signalled last week that rate hikes could still be on the cards if there is a smooth Brexit, despite the weaker global backdrop. However, traders are unlikely to place any large bets in sterling until there’s more clarity on whether Theresa May will be able to win significant concessions from the European Union on the Irish backstop issue.
Technical Analysis
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USD
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Fundamental Analysis
(11th Feb): Powell speech is not likely to bring much new information to the market while the Fed’s dovish tone has been gradually priced in by investors. It’s going to be relatively quiet in the US as some key data such as Q4 GDP have yet to be rescheduled following the disruption from the government shutdown. The spotlight will, therefore, fall on inflation indicators. The CPI report is out on … [/blur][/vc_column_text][/vc_column][/vc_row][vc_row row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” text_align=”left” background_animation=”none” css_animation=””][vc_column][vc_empty_space height=”35px”][vc_row_inner row_type=”row” type=”full_width” use_row_as_full_screen_section_slide=”no” text_align=”left” css_animation=””][vc_column_inner width=”1/5″][/vc_column_inner][vc_column_inner width=”3/5″][vc_separator type=”normal” color=”#b70909″ border_style=””][/vc_column_inner][vc_column_inner width=”1/5″][/vc_column_inner][/vc_row_inner][vc_empty_space height=”35px”][/vc_column][/vc_row][vc_row row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” text_align=”left” background_animation=”none” css_animation=””][vc_column width=”1/5″][/vc_column][vc_column width=”3/5″][kswr_heading head_align=”center” head_subtitle_color=”#333333″ head_title=”ACCESS RESTRICTED” head_title_fsize=”font-size:23px;line-height:2;” head_title_fstyle=”font-family:Inherit;font-weight:700;” head_subtitle_fsize=”font-size:17px;line-height:1.5;” head_subtitle_fstyle=”font-family:Inherit;font-weight:inherit;” head_title_margins=”margin-top:0px;margin-bottom:0px;” head_subtitle_margins=”margin-top:0px;margin-bottom:0px;”]Our comprehensive daily reports covers both technical and fundamental analysis, and are customised to your requirements.
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