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Au Revoir, again, and again

Au Revoir, again, and again

Sterling spiked yesterday morning after rumours that the German government would propose a five-year time limit on the Northern Ireland backstop but Sterling surrender all gains as the rumours were swiftly denied. A lack of EU opposition to a Brexit extension did protect the Pound from a sustained sell-off, as did the hint that it would be a twelve-month extension. A draft EU statement indicated willing to extend Article 50 but the date fields were left blank until today’s EU Council meeting. Caution was evident given the likely risks of conditions being imposed. There has been a lack of significant progress from talks between the government and Labour Party and internal political tensions remain intense. Sterling retreated below 1.3050 on the Dollar and the Euro pushed back to near 1.1560.

Sterling has gained some ground first thing this morning with volatility inevitable throughout the day. Should the EU block an extension, albeit seemingly unlikely, the Pound sell-off will be brutal.


The US Dollar struggled across the board for the second successive session. The Dollar Index is down 0.15% after news emerged that the market is set to witness yet another trade war. After the questionable status of NAFTA/USMCA, and the US-China almost-there trade deal, the US Administration has switched its attention towards the EU making a list of EU imports (blue-veined cheese and wine included) which will be subject to additional taxes. The move comes on the back of WTO findings that EU subsidies to Airbus are causing adverse effects to the US.

The US NFIB small-business confidence index strengthened slightly to 101.8 for March from 101.7 previously and above consensus forecasts. The labour-market data remained robust with upward pressure on wages, although pricing pressures eased slightly. The JOLTS data recorded a decline in job openings to 7.1mn for February from 7.6mn the previous month. There was also a decline in the number of hires with little change in separations. IBD April consumer confidence declined to 54.2 from 55.7 previously, maintaining the recent choppy run of data and underlying doubts over the outlook.

The Dollar recovered from lows against commodity currencies while against the Euro settled around 1.1260. Federal Reserve (Fed) Vice-Chair Clarida stated that the US economy is close to or at the inflation and jobs goals, maintaining expectations that the Fed would keep interest rates on hold in the short term. Minutes from March’s meeting will be released later today with markets looking for further guidance on the 2019 outlook. The Dollar was little changed this morning.


General consensus for today’s European Central Bank (ECB) meeting is that nothing new will be announced. A more dovish shift in their ideology, as well as previous announcements, means that no new measures should be announced today. If there is anything contrary to a consensus to come from the meeting we can expect volatility, just as if ECB President Draghi’s commentary throws up any more surprises we can also expect significant volatility.

There are reports that Italy is set to cut its 2019 GDP growth forecast to 0.1% from 1.0% which negatively affected the Euro. Tusk commented that talks with China had been tough and the single currency settled around the 1.1260 mark versus the Dollar.

Data today consists of French and Italian industrial output up first thing. It is then swiftly followed by quite a bit of data out of the UK including manufacturing production, industrial production (year-on-year and month-on-month), index of services, trade balances and then GDP numbers for Feb. Lunchtime sees the ECB interest rate decision which will be watched closely then at 1.30 pm is the ECB’s statement and press conference. Later this evening we see the European Council summit on Brexit and then at 7:00 pm a speech by the ECB’s Coeure.


Data to watch:

00:30 AUD Westpac Consumer Confidence (Apr)
02:30 AUD RBA’s Debelle speech
06:15 JPY BoJ’s Governor Kuroda speech
08:30 GBP Manufacturing Production (YoY) (Feb)
08:30 GBP Manufacturing Production (MoM) (Feb)
08:30 GBP Industrial Production (MoM) (Feb)
08:30 GBP Gross Domestic Product (MoM) (Feb)
11:45 EUR ECB Interest Rate Decision
11:45 EUR ECB Deposit Rate Decision
12:30 USD Consumer Price Index Core s.a (Mar)
12:30 USD Consumer Price Index (MoM) (Mar)
12:30 USD Consumer Price Index (YoY) (Mar)
12:30 USD Consumer Price Index ex Food & Energy (YoY) (Mar)
12:30 USD Consumer Price Index ex Food & Energy (MoM) (Mar)
12:30 EUR ECB Monetary Policy Statement and Press Conference
15:50 USD Fed’s Quarles speech
16:00 GBP European Council Summit on Brexit
18:00 USD Monthly Budget Statement (Mar)
18:00 USD FOMC Minutes
18:00 EUR ECB’s Coeure speech
23:50 JPY Foreign Investment in Japan Stocks (Apr 5) 

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