Election and referendum talks gain pace
Sterling fared slightly better after global risk conditions improved during Friday, and oil prices increase added support. Shadow Chancellor John McDonnell commented that he was optimistic on cross-party Brexit talks producing a breakthrough and Chancellor Philip Hammond opined that a second EU referendum was likely to be put to parliament at some stage. Concerns remain over the sustained political uncertainty and the slim hopes that the parliamentary deadlock would be broken soon. The prospect of a General Election in light of Theresa May’s extremely weak position added to fears that prolonged uncertainty and financing issues from inventory building would erode near-term growth further. Implied volatilities declined sharply, but with limited buying interest.
The Euro advanced to the 1.1585 area while Sterling failed to hold above 1.3100 against the Dollar. This morning Sterling opens just below 1.3100 and oil prices have dipped slightly.
US import prices rose by 0.6% last month, driven by higher fuel prices with the Export Price Index advanced during the same period.
The US University of Michigan consumer confidence index declined to 96.9 for April from 98.4 previously with a small improvement in the current conditions component offset by a decline in expectations, although global risk trends dominated.
US Secretary, S.Mnuchin noted US-China trade talks appear to be advancing towards an agreement, lending extra oxygen to the prevailing upbeat atmosphere surrounding the risk-associated universe.
Today the monthly reading of the US NY Empire State manufacturing index will perform its role of the only economic data. The manufacturing gauge could rise to 6.0 from 3.7. A speech by Chicago Federal reserve member Evans is also expected today.
The Euro had a more positive day on Friday which saw the single currency hit 1.1300 versus the Dollar. This came off the back of some fresh Dollar selling as well as more positive comments from the European Central Bank’s (ECB) Praet and Draghi. Praet stated that the Eurozone was stabilising and was set for a recovery in H2 2019. He also mentioned that there was no need for lowering interest rates and the economic data held firm, although still negative, lending some support for the single currency. German benchmark yields hit a three-week high which also underpinned the uptick.
First up today is the UK’s house price index, closely followed by Swiss producer and import prices. Later sees the German Buba monthly report and then this evening the Bank of England’s (BofE) Haskel speech. Parliament is in recess so news over Brexit should remain to a minimum.
Data to watch
14:30 CAD Bank of Canada Business Outlook Survey
16:00 GBP BoE’s Haskel speech