MORNING ROLL CALL
German exports break records despite the monthly fall, Trump gets ready to meet Abe, currency traders should prepare
Despite the latest data from Germany disappointing and missing forecasts, the largest economy in Europe still broke exporting records in 2016. The metrics released on Thursday were: monthly exports falling by -3.3%, balance of trade at 18.7b euros (versus the 22.7b previously) and the current account for the month was 24b, versus the expectation of 25b. Exports climbed by 1.2% in 2016 to 1.2 trillion euros according to the Federal Statistics Office, whilst imports rose by 0.6% to 954.6 billion euros, leaving Germany’s trade surplus at 253 billion euros in 2016. The country’s current account surplus reached 266 billion euros in 2016.
However, certain market commentators found fault in this economic model, suggesting that Germany needs to rip up their orthodox, text book model of efficiency, in favour of importing more, Marcel Fratzscher, head of the DIW economic institute in Berlin;
“The fact that the German economy is exporting much more than it imports is a source of concern and no reason to be proud. The record surplus will continue to fuel conflict with the U.S. and within the European Union.”
Now you could waste a couple of minutes of your life attempting to get your head around this statement, or dismiss it as nonsense.
In other economic calendar news released on Thursday the continuous unemployment claim numbers in the USA fell to 234k, ahead of predictions of 249k. Wholesale trade sales beat expectations by coming in up 2.6%, whilst wholesale inventories stayed on track by recording a 1% increase.
It’s not listed as a high impact calendar news event, but the meeting between Trump and Japanese prime minister Shinzo Abe in the USA, should prove to be fascinating and currency traders should ensure they keep up to date with what’s said.
Trump has abandoned the Trans Pacific Partnership, threatened Toyota with tariffs, and (in what’s become a habit) accused Japan of being another country practicing undervalued currency manipulation, quite a start for his first two weeks in office. Japan could point out that they’ve invested $400b in USA manufacturing facilities creating circa two million jobs, but it’ll probably fall on deaf ears. Toyota have committed to invest another $10b into the USA, whilst Japanese SoftBank will be investing $50b into the USA, creating possibly 50,000 jobs. As for a devalued currency, the low interest rate model and trillions of QE created by asset purchase schemes, is a model the USA has also embraced. USD/JPY traders should nevertheless stay focused on the meeting.
After Trump tweeted that a “phenomenal tax deal” was on its way, bank shares in the USA rallied, as did the SPX and DJIA. The SPX reached a record high, rising by 0.6% to 2,307.74 in New York. The DJIA added 115.70 points to 20,170.04, whilst the Nasdaq also reached a record high.
The Dollar Spot Index traded higher by 0.3% on Thursday, arresting its six week losing streak. EUR/USD weakened by 0.3% to $1.066, GBP/USD fell by 0.3% to $1.250. WTI oil rose by 1.3% to settle at circa $53 per barrel. Gold slumped by 0.6% to $1,232 an ounce, after temporarily reaching the highest level since November.
Economic calendar events for February 10th, all times quoted are London (GMT) time
09:30, currency effected GBP. Total Trade Balance (Pounds) (DEC). The prediction is for a reading of -£3,500, from -£4,167 previously. There is a raft of official UK data being released at this time, traders would be advised to monitor it all. Arguably this total trade balance data is the stand out reading.
09:30, currency effected GBP. Industrial Production (YoY) (DEC). Analysts will be looking to see an improvement in the UK’s production figure to 3.2%, from the previous reading of 2.0%. Naturally, any evidence of post referendum negativity is constantly searched for.
09:30, currency effected GBP. Manufacturing Production (YoY) (DEC). The prediction is for an increase to 1.7%, from the previous reading of 1.2%.
09:30, currency effected GBP. Construction Output SA (YoY) (DEC). The expectation is that the UK’s construction output will have fallen to -0.5%, from the previous reading of 1.5%.
13:30, currency effected CAD. Unemployment Rate (JAN). The forecast is for Canada’s unemployment level to have remained static at 6.9%.
15:00, currency effected USD. U. of Michigan Confidence (FEB). This survey is one of the most respected on the economic calendar for USA sentiment. The prediction is for a reading of 97.8, a slight fall from the previous 98.5.
