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Daily brief -Thursday 16 March 2017

By Daily Market Brief - Thu 16th Mar 2017

Some surprises, some confirmations

On the move

After three days of early-morning mischief sterling's phantom market-shifter failed to make an appearance today. Nevertheless there was plenty of currency action over the last 24 hours without the need for his/her/its input. British jobs, US interest rates and Dutch politics all made their presence felt.

First up was the curate's egg of UK employment data. Some of them were excellent; jobseeker numbers were down by -11,300 and unemployment fell to 4.7%, its lowest level since 1975.  Average earnings were a different matter though, rising by an annual 2.2%. That was less than the previous month's 2.6% and lower even than the 2.4% forecast by analysts. With inflation last seen at 1.8% and accelerating, investors worried that spending power could soon start to shrink, with all that implies for confidence and consumer spending.

Investors' reaction to the Federal Reserve's decision to raise its benchmark interest rate by 25 basis points was not wholly unexpected: they sold the dollar, having previously bought it in anticipation of just such a move. They were, however, unexpectedly positive about the Dutch election. When exit polls indicated a continuation of the parliamentary status quo the euro moved higher.

Antipodean letdowns

The action did not end with the Netherlands' election result. Disappointment about slower-than-expected growth in New Zealand was followed by dissatisfaction with the Australian employment data. Both took the shine off what could have been a better day for the Kiwi and the Aussie.

New Zealand's gross domestic product expanded by 0.4% in the fourth quarter of 2016. It was supposed to have grown by 0.7%. Australia lost 6,400 jobs in February. It should have added 16,000 according to analysts. The two currencies still gained ground against the pound, the Aussie adding a cent and a quarter and the Kiwi inching ahead, but that was simply a function of investors' reaction to the Fed rate increase.

America's dollar was Wednesday's biggest loser, falling by nearly a cent against sterling. South Africa's rand won the day, strengthening by 1.6%. The euro and the Swiss franc were up by a third of a cent.

More central bank decisions

The Swiss National Bank, Norges Bank, the Central Bank of Turkey and the Bank of England will all make announcements about monetary policy this morning. None is expected to make any change to benchmark interest rates but, with Turkey and Switzerland, one can never be sure.

In the shadow of Article 50 and the recent relative weakness of UK economic data the BoE will not be keen to rock the boat today. Expect no change to Bank Rate and an anodyne set of minutes.  

The only Euroland ecostats on today's agenda are for €Z inflation, which is forecast to be steady and on target at 2.0%. US housing starts and building permits appear after lunch, together with weekly jobless claims. Friday brings US industrial production, the provisional Michigan index of consumer sentiment and precious little else of any consequence.

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