No-deal shelved13th April 2019
The Pound enjoyed a calmer day with subdued trading, no economic data and Brexit doldrum given the Article 50 extension until the end of October. Although the threat of a ‘no-deal’ exit has been eliminated, confirmed by Whitehall reports ordering staff wind-down prep, there were further concerns of economic damage given weak investment. Mark Carney, Bank of England (BoE) Governor, warned that capital spending had stalled since 2016 and this was undermining productivity. Following Donald Tusks message to UK Politicians not to waste the extra time given parliament promptly announced a recess for the Easter break, giving rise to concerns there would be no progress. Intense pressure remains for Theresa May to resign. The Pound got no help from Oil prices, which suffered downward pressures meaning the Pound was unable to gain any traction. Resistance prevented a break past 1.3100 against the Dollar before a retreat to 1.3050 and the Euro held below 1.1630.
US producer prices increased 0.6% for March compared with consensus forecasts of a 0.3% gain with the year-on-year increase at 2.2% from 1.9% while core data was also slightly above expectations. Initial jobless claims declined to 196,000 in the latest week from a revised 204,000 which was below market expectations and the lowest reading since October 1969.
The firm data provides an element of Dollar support, although the impact was limited given expectations that the Federal Reserve (Fed) would hold interest rates steady in the short term. Although there were expectations of a dovish Fed stance, the Dollar was able to resist further losses and regained some ground during the session, especially with commodity currencies losing ground. Expectations of a dovish stance from other global central banks also underpinned the US currency.
Yesterday saw European Central Bank (ECB) member Villeroy announce that the Eurozone was in a slowdown. He stopped short of saying that the region was in recession, but it still had a detrimental effect on the single currency. There was some respite for the Euro when ECB member Knot stated that the imminent TLTRO loans need to be less generous than the previous one but combined with fairly strong data out of the US and the respite was short lived. Versus the Dollar the Euro retreated to the 1.1250 mark.
Data today consists of Spanish CPI and HICP figures for March. This is swiftly followed by EU industrial production for Feb which will be of interest to the market. As ever, Brexit will be the cause of most volatility in the market today.
Data to watch
06:30 CNY Imports (YoY) (Mar)
06:49 CNY Exports (YoY) (Mar)
06:49 CNY Trade Balance USD (Mar)
06:50 CNY Exports (YoY) CNY (Mar)
06:50 CNY Imports (YoY) CNY (Mar)
09:00 EUR Industrial Production s.a. (MoM) (Feb)
14:00 USD Michigan Consumer Sentiment Index (Apr)
18:00 CAD BoC’s Lane speech
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