Sterling gains start to fade2nd March 2019
Sterling maintained a firm tone yesterday in line with the strength seen at the beginning of the week. However, the Pound was unable to secure further gains as pressure for profit-taking increased with further selling interest above the 1.3300 level against the Dollar.
A junior government minister resigned in order to campaign for the Brexit deal to be approved before March 29th and officials downplayed the potential for any meaningful vote to be held next week. There was a lack of a catalyst for fresh Sterling buying despite some evidence that opposition to the Withdrawal Agreement within the Conservative Party was fading slightly. EU chief negotiator Barnier stated that there needed to be a good reason for a Brexit delay.
Despite some support in US trading from gains in oil prices, the UK currency dipped to lows near 1.3250 against the Dollar while the Euro recovered to near 1.1650. Sterling was also hampered by evidence that the US would take a tough stance in trade talks with the UK and was unable to make headway on Friday with markets wary over pre-weekend position adjustment.
Overall, the Dollar recovered from three-week lows following the firm data releases yesterday.
US GDP growth for the fourth quarter of 2018 was estimated at 2.6% compared with consensus forecasts of 2.4% with consumer spending growth at 2.8%. Headline consumer prices growth was slightly above expectations at 2.0%. Initial jobless claims increased slightly to 225,000 from a revised 217,000 previously. The Chicago PMI index spiked to 64.7 for February from 56.7, the strongest reading since December 2017 as all components registered strong readings on the month.
Later, during the early North American session, a slew of US economic data, including ISM manufacturing PMI, will be looked upon for some meaningful trading opportunities on the last trading day of the week.
Yesterday saw hopes that the Eurozone could be on the verge of a recovery. German yields increased, spreads between the US and Germany narrowed helping to underpin the single currency. CPI numbers for Germany increased slightly year-on-year and, during the New York session, there were reports that the European Central Bank (ECB) would adjust forward guidance next week, holding rates at 0.0% until Q2 2020. After initially rising to 1.1420 versus the Dollar, the Euro retreated to 1.1360.
Data today is quite varied. Retail sales out of Germany and Switzerland come out first thing, swiftly followed by PMI numbers out of Spain, Switzerland, Italy and France. Later, and perhaps more importantly, unemployment data is due out of Germany and Italy. UK PMI numbers are due and then all eyes will be on the EU’s CPI numbers for February.
Data to watch:
01:15 USD Fed’s Chair Powell speech
01:45 CNY Caixin Manufacturing PMI (Feb)
N/A AUD HIA New Home Sales (MoM) (Jan)
07:00 EUR Retail Sales (MoM) (Jan) (Germany)
07:30 CHF Real Retail Sales (YoY) (Jan)
08:55 EUR Unemployment Change (Feb) (Germany)
08:55 EUR Unemployment Rate s.a. (Feb) (Germany)
08:55 EUR Markit Manufacturing PMI (Feb) (Germany)
09:00 EUR Unemployment (Jan) (Italy)
09:30 GBP Markit Manufacturing PMI (Feb)
10:00 EUR Unemployment Rate (Jan)
10:00 EUR Consumer Price Index (YoY) (Feb)
10:00 EUR Consumer Price Index – Core (YoY) (Feb)
13:30 USD Core Personal Consumption Expenditure – Price Index (MoM) (Dec)
13:30 USD Personal Income (MoM) (Dec)
13:30 USD Core Personal Consumption Expenditure – Price Index (YoY) (Dec)
13:30 USD Personal Spending (Dec)
13:30 CAD Gross Domestic Product Annualized (QoQ) (Q4)
13:30 CAD Gross Domestic Product (MoM) (Dec)
13:30 USD Personal Income (MoM) (Jan)
14:30 CAD Markit Manufacturing PMI (Feb)
14:45 USD Markit Manufacturing PMI (Feb)
15:00 USD Michigan Consumer Sentiment Index (Feb)
15:00 USD ISM Manufacturing PMI (Feb)
15:00 USD ISM Prices Paid (Feb)
17:50 USD Fed’s Bostic speech
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