Fed Decision key to Dollar near term
The Pound dipped lower yesterday morning following comments from a government spokesman that Brexit talks with the Labour Party had yet to yield a breakthrough. Sterling dropped to near 1.2900 on the Dollar before edging back up and the Euro strengthened slightly to just below 1.1560. Investors were wary of month-end positioning which could trigger some Sterling selling pressure. The overwhelming market consensus is for the Bank of England (BoE) to hold interest rates at 0.75% with the Bank seeming bound by Brexit uncertainty. Lloyds Bank business barometer data strengthened to 14 for April, up from 10 in March, which suggested a net improvement in the outlook. Consumer confidence data was unchanged at -13. Sterling edged higher this morning against a weaker Dollar but has found resistance near 1.2950 while the Euro was little changed.
The Dollar gradually lost traction yesterday and against the Euro moved to the 1.1180 area.
US personal spending data was marginally above consensus forecasts yesterday, but inflation pressures remained subdued with the annual increase for the core PCE deflator slowing to 1.6% for March from 1.7% the previous month and the lowest reading for fourteen months. Given that this is the Federal Reserve’s (Fed) preferred inflation target and it is significantly below the 2% target, there is liable to be further political pressure for a cut in interest rates and there was speculation that Fed officials may also express concerns that the target is not being met on a sustained basis at this week’s policy meeting.
There is also inevitable caution ahead of key events later in the week including tomorrows Fed statement.
Monday saw a mixed day for the single currency. Money supply growth gained momentum in the year to March suggesting that the European Central Bank’s (ECB) policies were working. The spread between US and German two-year government bond yields dropped meaning the pair closed above 1.1176, a rise of 0.41%. This positivity was negated, however, with weak data maintaining concerns over the Eurozone. Economic sentiment weakened, industrial confidence declined and the services sentiment only managed to hold steady.
Quite a bit of data is due out of Europe today with CPI numbers due from quite a few countries. The data opens up with France, Spain and then the Swiss. The Bank of England’s (BofE) Ramsden gives a speech then we have unemployment numbers out of Germany, Italy and the EU. Italy also releases its CPI and GDP numbers before the most interesting news – GDP figures for the EU and the harmonized index of consumer prices.
Data to watch
07:00 CHF KOF Leading Indicator (Apr)
07:40 GBP BoE’s Ramsden speech
07:55 EUR Unemployment Rate s.a. (Apr) (Germany)
07:55 EUR Unemployment Change (Apr) (Germany)
08:00 EUR Unemployment (Mar) (Italy)
09:00 EUR Gross Domestic Product s.a. (YoY) (Q1)
09:00 EUR Gross Domestic Product s.a. (QoQ) (Q1)
09:00 EUR Unemployment Rate (Mar)
12:00 EUR Harmonized Index of Consumer Prices (YoY) (Apr) (Germany)
12:30 CAD Gross Domestic Product (MoM) (Feb)
13:00 USD S&P/Case-Shriller Home Prices Indices (YoY) (Feb)
13:45 USD Chicago Purchasing Managers’ Index (Apr)
14:00 USD Consumer Confidence
14:00 USD Pending Home Sales (MoM) (Mar)
15:00 CAD BoC’s Governor Poloz speech
15:00 CAD BoC’s Wilkins speech
22:30 AUD AiG Performance of Mfg Index (Apr)
22:45 NZD Participation Rate (Q1)
22:45 NZD Unemployment Rate (Q1)
22:45 NZD Employment Change (Q1)
22:45 NZD Labour Cost Index (QoQ) (Q1)