Daily Market Report - 26/02/2016


UK GDP came out in line with analyst expectations at 1.9%. In the day’s trading, Sterling licked its wounds near a seven-year low against the dollar after three tumultuous days since Prime Minister David Cameron called a referendum on Britain's EU membership for June 23. The pound was up 0.3 percent yesterday but remains around 3 percent lower this week against the dollar, with a test of its 2009 low of $1.35 within sight. A slowdown in the pace of sterling's decline against the dollar doesn't yet signal a correction according to many economists from the bulge bracket of investment banks.


US Durable Goods Orders rose unexpectedly by 4.9%, beating analyst expectations of a 2.5% increase. Initial jobless claims were slightly worse than expected (272k new monthly claims vs analyst expectations of 270k). Neither figure was able to curb the bounce in GBPUSD from the lows seen earlier in the week.


German consumer confidence survey came out stronger than expected at 9.5 versus 9.3, while Euro Area CPI data came out in line with expectations. In terms of price action, the euro underperformed this week, on fears a British EU exit could mean more uncertainty for Europe. There was some attention on Thursday on a fall in inflation expectations, which bodes ill for the ECB's battle to refloat the economy. The euro zone central bank's favoured measure of longer-term market inflation expectations fell to a record low below 1.4 percent on Thursday. It has fallen about 0.3% this year due largely to lower oil prices. People have started to price in the risk that the ECB will do more than previously assumed, but so far impact on the euro has been rather muted.

Key Announcements

13:00 – EUR – Consumer Price Index (YoY) expected to drop to 0.2% from 0.5%
13:30 – USD – GDP (Q4) expected to drop to 0.4% from 0.7%
15:00 – USD – Core Personal Consumption Expenditure Price Index (Annual) expected to fall to 1.2% from 1.4%