Busy day for the Eurozone
Overall, Sterling was hampered by a lack of positive rhetoric yesterday, with no evidence that Prime Minister May had made headway in securing parliamentary support. Attorney General Cox denied that he had given up attempts to force a specific time frame to end the backstop, but uncertainty prevailed. In this environment, the Dollar retreated back below the 1.3200 level against the Pound, while the Euro moved back above the 1.1630 level.
The UK PMI construction index declined to 49.5 for February from 50.6, below consensus estimates and the weakest reading since March 2018 when activity was hurt by adverse weather. Brexit-related uncertainty was a significant factor undermining the commercial sector while raw-material shortages were also a feature and the data undermined Sterling support. UK government sources indicated that a meaningful House of Commons vote was very unlikely to be held this week.
Latest consumer spending data was subdued with BRC reporting a 0.1% annual decline in like-for-like sales and Sterling was unable to regain ground with a dip to near 1.3150 against the Dollar. Cox and Brexit Secretary Barclay will hold further talks with the EU today whilst Sterling was unable to regain ground ahead of the latest services PMI data.
The Dollar gained with optimism that volatility would stay relatively low. Expectations of a dovish tone from other global central banks also underpinned the US Dollar and there was some speculation that a dovish Fed stance may not be sustainable over the medium term if the domestic economy remains strong. In this environment, the Euro declined to lows near 1.1300 before a tentative recovery to around 1.1330 later in New York trading. The Dollar maintained a firm tone on Tuesday as the Euro and commodity currencies remained out of favour.
Yesterday saw German yields decline throughout the day, with yield spreads moving against the single currency. This offset positive news from the Eurozone Sentix investor confidence index which improved to -2.2 from -3.7 for March, maintaining expectations that the economy was stabilising. Little movement in the Euro, combined with reports that the European Central Bank (ECB) is going to remain dovish this Thursday, hampered expectations.
There is a fair amount of data today, starting with like-for-like retail sales out of the UK. Swiss CPI index numbers are then followed by Markit services PMI data out of Spain, Italy, France and Germany with Italian GDP and EU PMI numbers due slightly later. Rounding off the day, we see the PMI numbers out of the UK, retail sales out of the EU and then finally this afternoon the Bank of England’s (BoE) Governor Carney is giving a speech.
Data to watch:
00:01 GBP BRC Like-For-Like Retail Sales (YoY) (Feb)
01:45 CNY Caixin Services PMI (Feb)
03:30 AUD RBA Interest Rate Decision (Mar 5)
03:30 AUD RBA Rate Statement (Mar)
07:30 CHF Consumer Price Index (YoY) (Feb)
08:15 EUR Markit Services PMI (Feb) (Spain)
09:00 EUR Gross Domestic Product (QoQ) (Q4) (Italy)
09:00 EUR Gross Domestic Product (YoY) (Q4) (Italy)
09:00 EUR Markit PMI Composite (Feb)
09:30 GBP Markit Services PMI (Feb)
10:00 EUR Retail Sales (YoY) (Jan)
N/A NZD GDT Price Index
14:45 USD Markit Services PMI (Feb)
14:45 USD Markit PMI Composite (Feb)
15:00 USD ISM Non-Manufacturing PMI (Feb)
15:00 USD New Homes Sales (MoM) (Dec)
15:35 GBP BoE’s Governor Carney speech
19:00 USD Monthly Budget Statement (Jan)
22:10 AUD RBA’s Governor Lowe speech