Poor UK data has done little to drive the pound lower, with market expectations clearly geared for further weakness. Meanwhile, Trump looks unlikely to find a resolution to US-China talks, nor spending talks with the Democrats.
UK data deluge does little to help economic outlook
Weak December GDP likely to be followed by further declines in January
Trump facing deadlocked talks on two sides.
The UK economy was always going to be the talk of the town today, with a host of economic data releases providing focus on a day largely devoid of any Asia, US, or eurozone data. However, unfortunately, the bad news for the UK economy is coming thick and fast in recent weeks, with the recent downward revisions in BoE growth forecasts providing warranted after UK GDP took a tumble. It is somewhat depressing to see the pound fail to really shift off the back of a shockingly poor set of data points, with markets largely expecting the worst at the moment.
UK GDP was always predicted to take a nosedive in January, given the sharp deterioration in UK PMI surveys last week. However, businesses appeared to have been taking their foot off the gas a month earlier than predicted, with the sharpest fall in UK GDP in almost three years seeing December GDP tumble into -0.4%. The worrying thing is that with December GDP of -0.4%, there is likely to be an even bleaker picture next month given the nosedive in January PMI figures.
Donald Trump is facing broken negotiations on two sides currently, with the President seemingly far off finding a resolution to the US-China trade talks and budgetary discussions. While we are seeing lower level trade talks between the US and China, the fact that Trump will not see his counterpart before the 1 March deadline points towards a likely imposition of 25% tariffs in under three weeks’ time. Meanwhile, the three-week spending bill introduced on 25 January is fast running out, and with no talks planned to find a resolution to the deadlock over border security funding. With the previous 35 day shutdown costing the US economy an estimated $11 billion, markets will be keen to see the
government avoid another similar breakdown in government funding.
Ahead of the open we expect the Dow Jones to open 88 points higher, at 25,194.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.