The CBI retail sales index remained at -45 for March and weaker than expected of -36 as lockdown restrictions continued to undermine activity. There was greater optimism over the outlook for April with expectations that a gradual re-opening of the retail sector will get underway. Sterling remained vulnerable in early Europe but gradually gained ground. There was an element of optimism over vaccine developments with hopes that the EU would avoid taking a confrontational stance.
Sterling found support below 1.3700 against the Dollar and recovered to the 1.3740 area whilst rising sharply against the Euro from lows of 1.1570 to highs, circa 1.1675.
Initial jobless claims declined sharply to a 12-month low of 684,000 in the latest week from a revised 781,000 the previous week and well below consensus forecasts of 730,000. Continuing claims declined to 3.87mn from 4.13mn and also below consensus forecasts. There was, however, a renewed increase in pandemic assistance claims for the latest data. The labour-market data maintained expectations of a strong labour-market recovery, robust US growth condition and also underpinned dollar sentiment. The fourth-quarter US GDP growth was revised slightly higher to 4.3% from the previous estimate of 4.1%.
Chicago Federal (Fed) President Evans stated that he suspected the Fed would not tighten interest rates until 2024. He also stated that inflation was likely to weaken in 2022, especially if supply-side issues fade. Richmond Fed President Barkin had a similar message with comments that inflation will spike in the short term, but will come back down next year. San Francisco head Daly stated that the job market is still in a trough.
Fed Chair Powell reiterated that the central bank is strongly committed to inflation that averages 2% over time. Powell’s rhetoric was slightly stronger than previously as the board tries to convince markets that interest rates will not be increased.
The Euro edged higher overnight and recovered slightly from 4 month lows against the Dollar. The single currency was last seen trading around the 1.1785 mark with weekend positioning expected to add further volatility.
Ongoing concerns about the economic fallout from further COVID-19 infections in Europe could keep a lid on any meaningful upside for the shared currency. Investors are worried that with the already fragile state of the Eurozone, additional restrictions alongside the slow pace of the vaccine rollout will derail any signs of near term economic recovery.
Data To Watch
07:00 - GBP - Retail Sales
09:00 - EUR - German ifo Business
Day 2 - EUR - EU Economic Summit
Posted in Daily Market News on Mar 26 2021