Economic concerns remain
The drop in UK inflation figures had little impact on the Pound and there was little call to change monetary policy; in fact there was a sense of relief that it wasn’t as bad as it could have been. An improvement in risk appetite and some bargain hunting after recent losses meant Sterling pushed the Euro back up to the 1.1365 level and 1.2385 against the US Dollar.
Concerns remain for the economic outlook with a very sharp downturn expected in the short term. The Service sector PMI (business sentiment) due this morning is expected to print another record low. Lingering concerns remain for the EU/UK trade talks as negotiations are continuing and Michel Barnier has a press conference scheduled for Friday and a stronger Dollar pushed the Pound back down to the 1.2300 area. Sterling opens near 1.2350 against the Dollar and 1.1420 on the Euro.
The dollar gradually lost ground yesterday with a dip in defensive demand as global equity markets rallied.
There was also still residual US currency demand as oil remained vulnerable to selling pressure. As the dollar regained ground, the Euro against the USD retreated steadily to lows just above the 1.0800 level.
This morning, the safe-haven dollar declined as oil prices recovered from their shocking fall earlier in the week and US coronavirus statistics also improved, especially in New York. Governor Andrew Cuomo also said that he had a “very productive” meeting with President Donald Trump, and diffused tensions also contributed to a better mood.
The latest Euro-zone and US PMI business confidence data will be released today with expectations of further weakness, especially in the services sector, with the Euro securing a marginal recovery to the 1.0830 area amid expectations of choppy trading later in the day.
The Euro advanced to 1.0885 yesterday , but failed to move above and struggled to generate any traction against the Dollar amid a lack of underlying confidence in the outlook.
There was further unease over potential divisions within the Eurogroup with reports that there are major discrepancies between member states on whether longer-term support should be in the form of subsidies or loans.
Eurozone consumer confidence declined sharply to -22.7 for April from -11.6 previously which was below expectations of -19.5 and very close to record lows registered in 2009 in the aftermath of the financial crisis as lockdown measures inevitably had a negative impact.
As of writing, the Euro is currently trading around the 1.0810 mark against its US counterpart.
Data to watch
07:15 – EUR – French Flash Services PMI
07:15 – EUR – French Flash manufacturing PMI
07:30 – EUR – German Flash Services PMI
07:30 – EUR – German Flash Manufacturing PMI
08:00 – EUR – Flash Manufacturing PMI
08:00 – EUR – Flash Services PMI
08:30 – GBP – Flash Manufacturing PMI
08:30 – GBP – Flash Services PMI
09:30 – GBP – MPC Member Vlieghe Speaks
12:30 – USD – Unemployment Claims
13:45 – USD – Flash Manufacturing PMI
All Day – EUR – EU Economic Summit