IFX Market Report
Monday 6th February 2017

Market Report

On Friday the UK Services Purchasing Managers Index (PMI) was shown to have fallen for the first time in four months, as the index dropped in January to 54.5 from a December performance of 56.2. The data confirms that this is a general contraction in PMI's, given that the manufacturing and construction PMI data released earlier in the week, was also shown to have decreased. Nevertheless, apparently the service sector is still ‘optimistic’ as a result of; low interest rates, solid order books and clarity over Brexit.

Sterling lost ground on Friday as the under-performance of UK PMI's caused growth concerns for the UK economy. GBPUSD opened at the daily high of 1.2537 and fell 0.65% to hit 1.2456. The pair then traded flat for the remainder of Friday in a tight range below 1.25 and this morning opens at 1.2474.

GBPEUR similarly took losses on Friday as the pound lost value on UK PMI data. The pair opened at 1.1662 and crashed 0.79% to hit 1.1571, the pair fell further over the weekend and this morning traded as low as 1.1565. Nevertheless the cross is slightly higher this morning at 1.1608.

The FTSE 100 is trading slightly higher this morning at 7,199.15 as banking stocks, namely Barclays (BARC) is up 1% on the news from the U.S. that Donald Trump is going to review the regulation of the financial sector. Furthermore Randgold Resources (RRS) is 4% this morning as the miner announces a record output in 2016.

Following recent profit warnings from budget-airliner Easyjet, Ryanair Chief Financial Officer, Neil Sorahan has given an interview this morning in which he discussed the impact of 'hard Brexit' for the airline. The budget airliner receives a quarter of their revenue in sterling which explains the 8% fall in profits to €95m (£82m), once more the fact that they have adopted a competitive pricing strategy since Brexit explains the 17% fall in average fares.

Worldwide News

The highly anticipated U.S. Nonfarm Payroll number was released at 13:30 on Friday, that measures the net number of people moving between 'unemployed' and 'employed' and as such, a positive number designates a reduction in unemployment. The January Nonfarm Payroll number came in well above both the forecast and the December number of 157k and 175k respectively as 227,000 jobs were added in the month, which is the best increase in four months.

Nevertheless the market reaction on Friday was not consistent with the data and may have been the result of a 'revision' in the December Nonfarm Payroll number. The revision showed that the number was actually inflated by 39,000 and caused the Unemployment Rate to increase from 4.7% to 4.8%. The Dollar in fact weakened as a result and EURUSD spiked from the intra-day low of 1.0709 and rallied 0.79% upon the release to hit 1.0794. The pair edged further north over the weekend to hit 1.0799 last night, however now trades at 1.0745.

Donald Trump's controversial 'travel ban' continued to capture headlines over the weekend as on Saturday a Federal appeals court rejected Trump’s request to reinstate the ban, the President has since criticised the decision and said that American citizens should blame the courts "if something happens" and admitted that he has already instructed border officials to check people "very carefully".

The opening day of the week is a quiet one in the data calendar, however tomorrow; overnight at midnight the British Retail Consortium (BRC) release the retail sales index and at 03:30 the Australian Central Bank release their rate statement and inflation expectations.