Prime Minister Theresa May won Parliament’s backing for an early general election yesterday, a vote she said would strengthen her hand in divorce talks with the European Union and help heal divisions in Britain.
However, the Pound hung around a cent lower than Tuesday’s six-and-a-half month highs against the Dollar yesterday; the jury is still out on whether it can make more progress on the back of optimism around the shock calling of a June 8 parliamentary election.
The prospect of a stronger majority and longer term for Prime Minister Theresa May, ahead of the opposition Labour Party by 20 clear points in opinion polls, has spurred hope of a slower and more regimented departure from the European Union in 2019. Market participants remain cautious on backing more gains into a weekend likely to be dominated by the first round of French elections.
Watch out for the UK retail sales data due for release on Friday, this could provide more evidence of sinking consumer demand and economic growth into the election.
Yesterday, Treasury Secretary Steven Mnuchin was quoted as saying in the Financial Times that U.S. President Donald Trump is “absolutely not” trying to talk down Dollar strength. Trump said last week in an interview with the Wall Street Journal that the Dollar was “getting too strong”, and backed away from labelling China a currency manipulator.
Mnuchin’s stronger comment comes in a more detailed interview of the one published in the FT on Monday, where he merely downplayed President Trump’s remark.
The Dollar gained after Mnuchin’s initial comments late on Monday. However, during yesterday the Dollar hit a three-week low versus the Euro when it was weakened by doubts over a fiscal boost promised by the president and by the pricing out of bets on three U.S. Federal Reserve interest rates hikes this year.
Eurozone inflation data was confirmed yesterday at 1.5% for March, down from 2.0% the previous month, maintaining expectations that the inflation spike from higher energy prices had eased slightly. European Central bank (ECB) member Ardo Hansson stated that it was not too early to discuss ECB policy, although it was too soon for concrete action regarding changes.
Eurozone inflation data was confirmed yesterday at 1.5% for March, down from 2.0% the previous month, maintaining expectations that the inflation spike from higher energy prices had eased slightly. European Central bank (ECB) member Ardo Hansson stated that it was not too early to discuss ECB policy, although it was too soon for concrete action regarding changes. Coeure stated that he sees the prospect for policy normalisation, but that it’s too early to review forward guidance.
The bank’s Chief Economist Peter Praet reiterated that the time had not yet come to tighten monetary policy and there had not yet been convincing signs of upward pressure on inflation, although near-term data had improved. Comments from ECB officials will remain under scrutiny ahead of next week’s policy meeting with the central bank still looking to play down the possibility of any policy shift.
Data to Watch:
7:00am EUR GER Producer Price Index (MoM) (Mar), PPI (YoY) (Mar). 1:30pm Initial Jobless Claims (Apr 14), Philadelphia Fed Manufacturing Survey (Apr). 3:00pm Consumer Confidence (Apr). 4:30pm GBP BOE’s Governor Carney Speech. 5:30pm GBP BOE’s Governor Carney Speech. 6:15pm USD Treasury Sec Mnuchin Speech.