January 17, 2022

“GBPUSD has rebounded from daily lows after the UK labour market report. The UK Jobless Rate remained unchanged at 3.7% in November while the increase in average hourly earnings was greater than anticipated. Investors are awaiting the critical Bank of Japan policy decision, UK inflation data, US Retails Sales and US PPI data, all due tomorrow.”

Sam Cornford, Partner – Head of Trading

Main Headlines

California has been hit by a final round of storms, bringing more rain and snow to a state already reeling from at least 19 weather-related deaths. Storms have battered California in recent weeks, flooding communities and forcing evacuations. The back-to-back deluges have eroded roads and felled trees, making each successive storm more liable to cause serious damage as soils weaken. As of yesterday, eight million people remain under flood watch on California’s central coast, and more than 38,600 customers in the state remained without power. US President Joe Biden declared a major disaster in California, the country’s most populous state, on Saturday night.

Jeremy Hunt is facing calls for a “social energy tariff” providing cheaper gas and electricity for low-income households to be introduced when government support ends next year. In an open letter to the chancellor, 95 charities and non-profit organisations have urged the government to move quickly to legislate for a change in energy bills for “those in greatest need to ensure they are able to live in their homes comfortably”. A social tariff would involve lower-income households receiving significant discounts on their energy bills, funded by taxation or by spreading the subsidy cost across better-off bill payers.

GBP

Sterling is well bid against most major currencies overnight. Pay growth in Britain, which is being closely watched by the Bank of England as it gauges how much higher to raise interest rates, picked up more pace in the three months to November, official data showed this morning. Pay excluding bonuses rose by an annual 6.4% in the September-to-November period, the biggest increase since records began in 2001, not counting jumps in the COVID-19 period which were distorted by lockdowns and government support measures. The ONS said Britain’s jobless rate held at 3.7%, in line with the poll, close to its lowest in almost 50 years. Employment rose by a faster-than-expected 27,000.

EUR

Euro is weaker than most major currencies in the early morning trade. Croatia announced a ban on lorries with trailers in the mountainous Lika and Gorski Kotar regions and also reduced speed limits and closed lanes and stretches of the A1 and A6 motorways. There was heavy rainfall in more southern parts of Croatia that were affected by the warm southerly scirocco wind. In southern Austria, a fresh fall of 10-20 cm of snow created half-metre drifts, bringing down trees and disrupting power supplies. More than 10,000 households were without power and there were also road closures. Zell Pfarre, close to the border with Slovenia, saw some of the highest snowfalls.

USD

The dollar is stronger against euro and weaker against sterling this morning. Former US Treasury Secretary Lawrence Summers claims that although the Fed is almost done, a recession still looms. Despite positive news in recent weeks, according to former Treasury Secretary Lawrence Summers, the US economy is still in a recession this year. The most recent US consumer price index report revealed a further slowdown in inflation to a 6.5% annual rate, the lowest since October 2021, the day before Summers gave his speech. He stated that recent “good news” included evidence of “wage restraint” following a slowdown in earnings growth in December.

Market

European markets were muted this morning, with concerns about the global economy high on the agenda at the World Economic Forum in Davos this week. The pan-European Stoxx 600 hovered around the flatline in early trade, with autos adding 0.5% while retail stocks dropped by a similar amount. The Nasdaq Composite is leading the way up 5.9%, as investors bought beat-up technology shares amid rising hopes of an improving landscape for growth stocks. The S&P 500 and Dow have advanced 4.2% and 3.5%, respectively, since the start of the year.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: UK Dec. Jobless Claims, Nov. Weekly Earnings
8:00 a.m.: Germany Dec. CPI
8:30 a.m.: ECB’s Centeno speaks
10:00 a.m.: Italy Dec. CPI
10:15 a.m.: ECB’s Muller speaks
11:00 a.m.: Germany Jan. ZEW Survey
11:00 a.m.: UK sells bonds
11:30 a.m.: Germany sells bonds
12:00 p.m.: Ireland Dec. CPI

Corporate Events

Earnings include Goldman, Morgan Stanley, United Airlines

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.