Earnings take centre stage
Despite benign risk conditions, a retreat in oil prices limited potential Sterling support. Foreign Secretary Jeremy Hunt commented that talks between the government and the Labour Party were more constructive than people think, allowing the Pound to make modest headway, although ranges were narrow as short term volatility continued to decline sharply. There was further selling interest above 1.3100 against the Dollar while the Euro retreated slightly to around 1.1587 as the Pound traded without direction or conviction.
Media reports emerged late on that the Brexit talks would continue throughout and despite the Easter recess, but markets were uneasy over underlying political stresses. Sterling hovers just below 1.3100 on the Dollar and 1.1590 on the Euro this morning. The latest UK labour market data arrives at 9.30am with the wages components important for interest rate expectations.
The New York Empire manufacturing index strengthened to a four-month high of 10.1 for April from 3.7 the previous month which was above consensus expectations. New orders also improved, but unfilled orders declined and upward pressure on prices also eased. Optimism over the outlook declined sharply to the lowest level for more than three years.
There were mixed comments from Chicago Federal Reserve (Fed) President Evans who stated that risks from downside scenarios loom larger than the upside at the moment, but that the economy is solid and looked stronger than it did in December. He could also see a situation where interest rates would be increased again. Nevertheless, he was concerned over the inability to meet inflation targets and stated that the Fed must be willing to let inflation rise modestly above the 2.0% target. Boston Fed President Rosengren also stated that the central bank should aim for inflation above 2.0% when the economy is strong in order to boost its ability to fight a downturn.
Yesterday saw very little volatility with the Euro, it traded within a 25-pip band around 1.1320 versus the Dollar. European Central Bank (ECB) member Villeroy announced that Eurozone and global headwinds should gradually fade which was a welcome sign of positivity. According to the Bundesbank, the German economy grew slightly in Q1 of 2019 but underlying growth trends still remained fairly subdued.
From a data perspective, initially the market will look at the UK’s unemployment rate, average earnings, the claimant count change (the number of people unemployed in the UK) and average earnings excluding bonus numbers. This is then followed by the German ZEW survey on economic sentiment and the current situation for April. The final piece of data today is the EUR ZEW survey on economic sentiment for April.
Data to watch
00:00 USD Fed’s Rosengren speech
01:30 AUD RBA Meeting Minutes
08:30 GBP ILO Unemployment Rate (3M) (Feb)
08:30 GBP Average Earnings Including Bonus (3Mo/Yr) (Feb)
08:30 GBP Claimant Count Change (Mar)
08:30 GBP Average Earnings Excluding Bonus (3Mo/Yr) (Feb)
09:00 EUR ZEW Survey – Economic Sentiment (Apr) (Germany)
09:00 EUR ZEW Survey – Current Situation (Apr) (Germany)
09:00 EUR ZEW Survey – Economic Sentiment (Apr)
N/A NZD GDT Price Index
13:15 USD Industrial Production (MoM) (Mar)
18:00 USD Fed’s Kaplan speech
22:45 NZD Consumer Price Index (QoQ) (Q1)
22:45 NZD Consumer Price Index (YoY) (Q1)
23:50 JPY Adjusted Merchandise Trade Balance (Mar)
23:50 JPY Merchandise Trade Balance Total (Mar)
23:50 JPY Imports (YoY) (Mar)
23:50 JPY Exports (YoY) (Mar)