Good morning

	High	Low			High	Low
EUR/USD	1.0905	1.0859		USD/ZAR	16.9000	16.6100
GBP/USD	1.4297	1.4237		GBP/ZAR	24.10	23.72
EUR/GBP	0.7658	0.7597		USD/RUB	80.17	78.18
GBP/EUR	1.3163	1.3058		USD/ILS	3.9619	3.9413
USD/JPY	118.00	117.22		S&P 500	1912	1877
GBP/CHF	1.4415	1.4305		Oil (Brent)	29.75	28.82
GBP/AUD	2.0831	2.0617		Gold	1091.0	1085.0

This morning’s news that China’s GDP for both Q4 and YoY fell was no big surprise. Q4 came in at 6.8%, while YoY ended at 6.90% compared to 7.30% YoY for 2014. We knew it was coming given the weaker real activity in recent months. The hope now is the PBoC will have the support of FED, BoE and ECB to do what is needed to get that GDP number back above the psychological 7% barrier. Don’t you find it strange that even at 6.90-7.00% the PBoC are not happy. Compare that with the US, EU and UK (2.50-3.50%) and you think at 6.90% the latter economies would bite the hand off for those GDP numbers. However when you are accustomed to GDP of 9-15% you can see why the PBoC are simply not satisfied. In their defence, there are factors which are weighing heavily against them and thus driving GDP lower, factors which were not around when they recorded in excess of 13% GDP in the 2004/2007 period, and even 9-11% in the 2008/2013 period. The world is a different place today with oil sub $30pb. While we are likely to see further losses in oil over the coming months, I think the market will  begin to stabilize and start rising again (as inflation hopefully starts to bite). That’s the hope at least.

Today we get the UK inflation numbers and as you can see from the table below, it looks like things are not going anywhere fast. The number on the right was previous, while the number to the left is the forecast. Suffice to say you can expect another 0.00-0.10% CPI number.

09:30	GBP		CPI (YoY) (Dec)		0.1%	0.1%
09:30	GBP		CPI (MoM) (Dec)		0.1%	0.0%

BoE’s Vlieghe said in a speech at the LSE that conditions aren’t yet in place to raise key interest rate. He sees no “convincing evidence” of upward momentum in pay pressures. “With growth still slowing, and inflation pressures either easing outright or disappointing relative to forecasts, I do not believe the conditions are in place to warrant a rise in bank rate”. Before raising rate, Vlieghe wants evidence that “growth is not slowing further, and that a broad range of indicators related to inflation are generally on an upward trajectory”. Structural changes in economy mean that “for a given level of growth, real interest rates may remain significantly lower than in the past”. “The possibility of this scenario makes me more patient,
other things equal, before raising rates, because we may not have to raise rates very much once we start”.

S.Africa’s ZAR firmed as intervention by the PBoC in the yuan helped ease global investor aversion toward emerging market assets. Nigeria’s share index fell to its lowest point since July 2012 yesterday, down 4.1% on the day with fund managers jittery over the CB’s inability to provide USD’s for investors exiting the market. In recent weeks we have seen the NGN fall from 265 to 305 on the back of these fears and the inability of local Nigerians to use their credit cards abroad or even pay for foreign school fees. Furthermore, the CB stopped selling USD to BDC’s. This story still has legs and we have not seen the bottom of the NGN.

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