Market themes of the Day: The Eurozone GDP and US retail sales in focus

What you need to know before markets open
Main themes: 

  • The  UK headline inflation decelerated more than expected to 1.8%% y/y in January while core inflation increased 1.9% y/y. The focus of the Bank of England remains on Brexit rather than on the policy target for now. For more details read my UK Inflation Analysis here
  • The European Commission said it did not receive any request for Brexit extension saying that normally the extension of Brexit deadline would not be open-ended implying that the European Commission expects the UK to delay Brexit. The news saw GBP/USD spike 80 pips to mid 1.2900s.
  • Investors are hopeful that a new round of US-China talks this week would bring the two sides close to resolving their ongoing trade war ahead of a March 1 deadline.
  • The US headline inflation decelerated to 1.6% y/y in January, with core inflation rising  2.2% y/y, beating the market estimate. The core inflation above estimates supported the US Dollar. 
  • The US President is considering a 60-day extension to trade tariffs deadline expiring by the 1 of March as trade talks move into the higher level.
  • The US retail sales are expected to rise 0.1% m/m in January while core retails sales are seen up 0.2% and retail sales control group up 0.4% m/m. For more details read Joseph Trevisani’s Preview here.

China

  • China is cracking down on individuals and corporations who buy or sell foreign currency on the black market as the government seeks to control capital flight and maintain the stability of the yuan exchange rate and its slowing economy.
  • China’s trade balance saw the surplus reach 39.16 billion USD in January, down from 55.07 billion in December as China’s demand slows. Exports rose 9.1% over the year while imports fell -1.5% in January.

Europe

  • The Eurozone industrial production fell more than expected by -0.9% over the month bringing the annual contraction to -4.2% over the year in December.
  • The European Commission said it did not receive any request for Brexit extension saying that normally the extension of Brexit deadline would not be open-ended.
  • German GDP is expected to rise 0.1% and decelerate to 0.9% y/y ion the preliminary reading for the fourth quarter last year.
  • The Eurozone GDP is expected to rise by 0.2% over the quarter and 1.2% over the year in the fourth quarter of 2018.

UK 

  • The  UK headline inflation decelerated more than expected to 1.8%% y/y in January while core inflation increased 1.9% y/y. The focus of the Bank of England remains on Brexit rather than on the policy target for now. For more details read my UK Inflation Analysis here
  • The UK trade Minister Fox said he expects negotiations rolling over the EU trade agreements to “go down to the wire”.
  • The Bank of England external Monetary Policy Committee member Gertjan Vlieghe is due to speak about the economic outlook and monetary policy at the Resolution Foundation, in London at 9:30 GMT.

US

  • The US headline inflation decelerated to 1.6% y/y in January, with core inflation rising  2.2% y/y, beating the market estimate.
  • Atlanta Federal Reserve President Raphael Bostic said that 2.5% GDP growth for the year is consistent with his forecast of one rate increase.
  • Cleveland Fed President Loretta Mester said that the US labor market is probably a little bit beyond maximum employment. 
  • The US retail sales are expected to rise 0.1% m/m in January while core retails sales are seen up 0.2% and retail sales control group up 0.4% m/m. For more details read Joseph Trevisani’s Preview here.
  • The US initial jobless claims are set to reach 225K in the week ending February 8.
  • The US factory gate inflation is expected to decelerate to 2.1% y/y in January while core PPI is seen rising by 2.5% y/y.
     

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