Bond-buying until the Autumn
Consumer credit demand figures were tepid but business lending recovered, suggesting a potential investment recovery. March mortgage approvals printed better than forecast, although there was still an annual decline of 10%. CBI retail sales produced a weak reading of -2 for April from -8 previously, but retailers were optimistic for May.
The lunchtime European Central Bank (ECB) policy conference triggered volatility on the Pound, and the approach 1.4000 against the Dollar was followed by a fairly hasty retreat below 1.3920 as the Euro crumbled. The Euro swiftly lost ground to trade below 1.1500 and even rhetoric from EU chief negotiator Barnier stating the UK would lose a lot more than the EU from Brexit did nothing to restore the status quo.
The US Dollar’s rally is continuing despite the US 10-year yield dipping back below the 3% level. Economic data released was slightly mixed as a decline in durable goods shipments suggested business spending on equipment slowed in the first quarter, but jobless claims fell to a 48-year low.
The US wholesale inventories rose 0.5% m/m in March. The US trade balance with goods recorded a better-than-expected deficit of $68 billion in March whilst US initial jobless claims fell unexpectedly strongly to 209K in the week ending April 20.
The major focus in the American market session later today will be the preliminary quarterly GDP figures being released alongside Personal Consumption Expenditures. The annualized GDP is forecast to grow by 2.0%, up from 2.9% previously, while PCE for Q1 is expected to expand by 2.4%, up from 1.9% previously.
Mario Draghi, President of the (ECB), kept interest rates unchanged at 0% as the current injection of €30bn per month continues to flow into the financial system. This policy has been a continued effort to push inflation back up to the target just shy of 2%. Further, the lack of changes to the statement or bond-purchase programme met market expectations.
In the statement after, Draghi was characteristically coy with his rhetoric which was somewhat dovish. Draghi wanted to assess whether the recent slowdown in the economy was just a normalisation from what was a period of very fast expansion at the beginning of the year or whether it was part of a protracted slowdown. Further, as far as inflation is concerned, Draghi did state the headline rate was likely to linger around the 1.5% level going forward with the likelihood for this to extend for the remainder of the year.
The Euro moved higher against its peers as an initial response to the ECB President’s comments with traders covering short positions. However, selling pressure swiftly resumed with the Euro losing out to both the Pound and Dollar, weakening to the 1.1500s and 1.2100s respectively.
Data to Watch:
n/a JPY BoJ Press Conference
00:30 JPY Tokyo CPI ex Fresh Food (YoY) (Apr)
03:00 JPY BoJ Monetary Policy Statement
04:05 JPY BoJ Interest Rate Decision
06:45 EUR ECB’s Mersch speech
07:45 EUR ECB’s Lautenschläger Speech
07:45 FRA Consumer Price Index (EU norm) (YoY) (Apr)
09:00 GER Unemployment Rate s.a. (Apr)
09:00 GER Unemployment Change (Apr)
09:00 EUR ECB’s Mersch speech
09:00 CHF SNB Chairman Jordan Speech
09:30 GBP Gross Domestic Product (QoQ) (Q1)
09:30 GBP Gross Domestic Product (YoY) (Q1)
10:00 EUR Business Climate (Apr)
13:30 USD Gross Domestic Product Price Index (Q1)
13:30 USD Gross Domestic Product Annualized (Q1)
13:30 USD Personal Consumption Expenditures Prices (QoQ) (Q1)
13:30 USD Core Personal Consumption Expenditures (QoQ) (Q1)
15:00 GBP BOE’s Governor Carney speech
15:15 GBP MPC Member Haldane Speech
18:00 USD Baker Hughes US Oil Rig Count