There were no surprises yesterday when the European Central Bank lowered their interest rates levels by 25 basis points, down to a base rate of 2.9%. Even if the decision did not come as a shock, markets did react within that hour. In the press conference ECB president Christine Lagarde mentioned that the European economy is set to remain frail in the short term. Manufacturing is expected to continue decreasing in the first quarter leaving pressure on economic growth. The upside is that the service sector is forecasted to see expansions – which could dampen the economic situation across Europe. While GDP-data still is in a sensitive region, inflation rates are expected to come to a halt due to wages are predicted to head downwards. Christine Lagarde also mentioned that as long as trade tensions between Europe and US stays quiet, exports should start picking up and show recovery.
German retail sales did not impress this morning, depreciating the most in the last two years in December of -1.6%. Even with a strong retraction for Germany’s retail sector, markets did not react much on the news – seeing signs of poor performance for Germany in the last few months. This will be followed by unemployment rates being released for Germany, expected to increase slightly to 6.2%. We did see the unemployment figure for Europe increase earlier in the week, so there would not be any surprises if Germany would follow suit.
This afternoon concentration will mainly be on the US and their PCE (personal consumption expenditure) and Canadian GDP-figures. The Canadian dollar did hit a 5-year low against the USD yesterday evening after new threats from President Trump on imposed tariffs on Canada and Mexico. A potential retraction of economic growth for the Canadian economy, could cause additional volatility to currency pair already under pressure.
GBP/EUR 1.1954 GBP/USD 1.2395 GBP/AED 4.5540
GBP/AUD 1.9931 GBP/CHF 1.1296 GBP/CAD 1.7960
GBP/NZD 2.1948 EUR/USD 1.0359 GBP/ZAR 23.1011