Carney confirms Sterling optimism
Bank of England Governor Carney explained that the bank is already seeing a rebound in business confidence and to some extent a firming in consumer confidence and he also took a slightly more optimistic stance on potential Brexit opportunities.
Sterling was still subjected to a correction during Friday’s trading session following strong gains the previous day. There are still expectations that the change of Chancellor will lead to a more expansionary budget and lessen any potential for interest rate cuts. Sterling settled just below 1.3050 against the Dollar after finding support close to 1.3000 with the Euro close to 1.2045.
CFTC data recorded a renewed increase in long Sterling positions, increasing the risk of selling pressure if forthcoming business confidence data is weaker than expected. Weekend reports suggested the March budget may be delayed which caused some uncertainty, but markets were still expecting a policy boost for the year ahead. Markets were also still wary over EU trade negotiations with reports that the UK would refuse to abide by EU rules on tax and workers rights. Sterling holds steady this morning ahead of important domestic data releases later on in the week.
US retail sales increased 0.3% for January, in line with consensus forecasts, while underlying sales also matched expectations with a 0.3% increase, but control group sales were unchanged on the month. Industrial production declined 0.3% for January as manufacturing output edged lower. The University of Michigan consumer confidence index strengthened to 100.9 for February from 99.8 previously with a small decline in current conditions offset by an improvement in expectations.
The dollar overall maintained a very firm underlying tone against the Euro settling around 1.0830 at the European close and trading around fresh 33-month lows with no significant recovery.
Eurozone fourth-quarter GDP was confirmed at 0.1%, in line with expectations, although year-on-year growth dipped to 0.9% from an upwardly-revised 1.2% previously. There had been some speculation over a weaker figure after the German economy failed to grow and the data sparked an element of relief, but with only marginal Euro gains. Underlying Euro-zone sentiment remained weak with German political stresses also a significant factor undermining support.
CFTC data recorded a significant increase in net short Euro positions to 7-month highs, increasing the risk of a short-covering rally and continues unable to make headway against the Dollar today and continues to trade at the 1.0840.