Daily Market Report - 19/02/2016

GBP

Yesterday saw a bout of sterling strength with GBP up from a two-week low against USD and also performing better than EUR. This positivity is attributed to tentative signs that a deal will be reached at a summit where Britain is seeking more favourable terms for its EU membership. This rounds off a week of great volatility for GBP with renewed positive sentiment being shed on the Brexit crisis; markets will be watching out for the official announcement later on today to see if this positivity surrounding sterling can continue and thus paving the way for an EUR referendum which is widely expected to happen in June, dependent on the EU statement release. Analysts are expecting sterling to be volatile in the run up to the vote with forecasts for GBP to decline 15 to 20 with ratings agengy Standard & Poor’s saying a Brexit could hurt sterling’s status as a global reserve currency should Britons opt to leave the EU. 
 

USD

Despite the better than forecast US data of Philly Fed Manufacturing Index and unemployment claims coming out at -2.8 against forecast of -2.9 and 262k against previous of 269k respectively, we saw USD fall against most other counterparts due to both oil and equities markets following downward trends over the course of the day to retrace any gains USD had made. Given the weaker oil prices and turbulent financial markets as a whole, we could see the Federal Reserve holding off raising interest rates in 2016, contrary to what was mentioned in December. Although the dollar index did show a rise of 0.1 percent which was mirrored in a downward trend on EURUSD; it only shows a marginal retrace to where it was trading higher with greater USD strength. 
 

OIL

Brent settled lower on Thursday after data showed US crude oil inventories rose to record highs overshadowing productions freeze plans by major oil producers, which sharply boosted oil markets this week. Oil prices has risen more than 14 percent over the last three days after a plan by Saudi Arabia and Russia, endorsed without commitment by Iran on Wednesday to freeze oil output at January’s highs. 
 

Key Announcements

09:30 – GBP - Retail Sales MoM expected at 0.8% against forecast of -0.1%
09:30 – GBP - Public Sector Net Borrowing forecasted come in at -13.8B against forecast of -0.1B
13:30 – USD - CPI MoM forecasted to come out same as previous at -0.1%
13:30 – USD - Forecasted to come in at 0.2% against previous of 0.1%