Sterling had another dismal day on Friday – 18th January 2016
Sterling had another dismal day on Friday, dropping nearly two Euro cents between London’s opening and the close of trading in San Francisco. It has picked up a little in the Far East this morning but is still down by a net 1% against the Euro and the US Dollar. It isn’t just Sterling supporters though that will be feeling down this morning; anyone invested in diesel cars, steel production, oil or just about any equity market in the world will looking at their investments heading down. Sterling is actually down by -1.3% for the year to date so far.
William Dudley, the president of the New York Federal Reserve and an ex officio member of the rate-setting Federal Open Market Committee, said in a speech on Friday that US interest rates remain likely to rise further this year despite economic concerns. Investors are not so sure.
Mr Dudley’s argument that “in terms of the economic outlook, the situation does not appear to have changed much since the last FOMC meeting” was not in tune with his colleague James Bullard’s comments the previous day. Mr Bullard, who last year was a major cheerleader for higher rates, was distinctly un-hawkish on Thursday. Whilst he agreed that a further percentage-point increase this year looks “about right”, he also said the decline in inflation expectations “is becoming worrisome”.
Friday’s US ecostats looked a bit worrisome too. Capacity utilisation fell to its lowest level since 2011, industrial production fell for a fifth successive month and retail sales were down. A three-quarter-point improvement in consumer sentiment still left it five points lower than a year ago.
There is no serious economic data scheduled for release during today’s London session and the US will be closed for Martin Luther King Day. Things become more interesting tomorrow morning when China publishes the figures for retail sales, industrial production, urban investment and fourth quarter gross domestic product. All will be crucial to investor sentiment and risk appetite.