The Deal is…I’m off!29th March 2019
The Distributive Trades survey dropped sharply, printing -18 in March, far below forecasts and highlighting short-term pain in the retail and wholesale distribution sectors. The Pound suffered another jittery trading day as political developments dominated sentiment. Theresa May met the 1922 committee and offered to resign if the House of Commons backed the government’s Withdrawal Deal. The comments increased speculation that enough members would be moved to support the agreement and Sterling pushed higher on the Euro, peaking at 1.1765. There was selling above 1.3250 against the Dollar and Sterling dipped sharply again after the DUP maintained their opposition to the Brexit deal.
None of the indicative votes gained majority support in the House of Commons which triggered further losses as uncertainty reigns. Sterling fell below 1.3150 against the Dollar before the underlying opposition to a ‘no-deal’ Brexit allowed a retracement. A fragile Euro has settled around the 1.1725 area.
The Dollar failed to gain further traction as bond yields declined and conditions within the global economy remained a key global focus with commodity currencies securing a slight recovery. After recording fresh two-week highs in the Dollar index (tracking the US Dollar against a basket of its rival currencies), the index is now facing some selling pressure against the backdrop of souring risk appetite sentiment and the persistent decline in yields of the US money markets.
US economic data recorded a sharp decline in the US trade deficit to $51.1bn for January from $59.9bn the previous month. The data triggered a small upgrade to first-quarter GDP growth estimates. The current account deficit widened to $134bn from $127bn the previous quarter, illustrating potential Dollar vulnerability if confidence in capital inflows fade.
In the US data space, the final release of the US GDP for the October-December period will take centre stage seconded by usual weekly Claims and Pending Home Sales. There is also a slew of Federal Reserve speakers, which should stay in the limelight following the last FOMC meeting: R.Quarles will speak at a European Central Bank (ECB) event in Frankfurt, Vice Chairman R.Clarida is speaking at the Bank of France in Paris, M.Bowman will be in a panel discussion on Agriculture and Community Banking and St. Louis Fed J.Bullard will speak in Wisconsin.
Yesterday, Germany sold new 10-year bonds in markets and the yield was negative. Essentially what this means is that investors are effectively paying to lend money to the German government, fuelling fears of an imminent recession. The ECB’s Draghi confirmed that economic risks were still pointing towards the downside and were only really likely to continue. He also mentioned that an interest rate rise could be delayed even further. Versus the Dollar, the single currency fell to the 1.1250 mark, whilst the Pound performed strongly.
Datawise, today sees Spanish CPI figures first up swiftly followed by quite a few numbers out of the EU: Money supply, private loans, a speech by the ECB’s De Guindos, industrial confidence, business climate, consumer confidence and services sentiment. After lunch, we see German CPI numbers, most notably the Harmonized Index of Consumer Prices year-on-year for March.
Data to watch:
09:10 EUR ECB’s De Guindos speech
10:00 EUR Business Climate (Mar)
11:15 USD Fed’s Quarles speech
12:30 USD Initial Jobless Claims (Mar 22)
12:30 USD Continuing Jobless Claims (Mar 15)
12:30 USD Gross Domestic Product Price Index (Q4)
12:30 USD Gross Domestic Product Annualized (Q4)
12:30 USD Personal Consumption Expenditures (QoQ) (Q4)
12:30 USD Core Personal Consumption Expenditures (QoQ) (Q4)
13:00 EUR Harmonized Index of Consumer Price (YoY) (Mar) (Germany)
13:30 USD Fed’s Clarida speech
14:00 USD Pending Home Sales (MoM) (Feb)
17:00 CHF SNB’s Maechler speech
17:15 USD Fed’s Williams speech
21:45 NZD Building Permits s.a. (MoM) (Feb)
23:30 JPY Tokyo CPI ex Fresh Food (YoY) (Mar)
23:30 JPY Tokyo Consumer Price Index (YoY) (Mar)
23:30 JPY Tokyo CPI ex Food, Energy (YoY) (Mar)
23:30 JPY Unemployment Rate (Feb)
23:30 JPY Jobs / Applicants Ratio (Feb)
23:50 JPY Industrial Production (YoY) (Feb)
23:50 JPY Large Retailers’ Sales (Feb)
23:50 JPY Retail Trade (YoY) (Feb)
23:50 JPY Retail Trade s.a (MoM) (Feb)
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