Goodbye everybody, it’s time to go
Sterling continues to be driven by the changing winds of the Brexit storm especially with no UK data releases and the EU elections triggering a media blackout. Despite hitting 1.2606 against the Dollar yesterday, Dollar weakness and optimism for faster Brexit progress once Theresa May resigns took precedence allowed some retracement. The market awaits the publication a new improved Brexit plan which has already attracted criticism from all political sides. It is also expected that the Prime Minister PM will inform her advisors this morning of the day she plans to step down, estimated to be the week of 10th June, and again meet the 1922 committee’s head, Sir Graham Brady this morning.
UK Retail Sales is due out this morning and it’s forecasted to be a weak reading, with a 0.3% decline in April. Consumer inflation released earlier this week printed below expectations, but for Sterling buyers Brexit is still the main driver.
The US Dollar is holding onto recent gains against most major currencies except the Japanese Yen and Swiss Franc. Risk-off trading activities see the flow of funds into trading safe-haven assets. Gold is trading $8 an ounce higher as market sentiment over trade tensions remain fragile. PMIs released across the world economies today are pointing to lower readings.
Economic data seems to have taken a backseat lately with politics and noises from the Twittersphere injecting unwelcome volatility into the currency market. Initial unemployment insurance claims, released this morning, came mostly in line with market estimates at 211k. The market now shifts its attention to the US Purchasing Managers Index and home sales data.
Weaker than expected Eurozone data cause the Euro to slide in early trading against both the Pound and the Dollar. PMI numbers were lower than consensus which implied that the slowdown in the manufacturing sector is spreading to the services sector. German IFO business climate also fell and the European Central Bank (ECB) minutes also acknowledged the slowdown. Fears over a full-blown trade war across the pond initially boosted the pair, as traders sought a safe haven, but a sharp fall in US Treasury bond yields capped the EUR/USD recovery to just below 1.1200.
A very thin economic docket today sees more emphasis on news surrounding Brexit, Theresa May and the trade war. Only German retail sales and the UK’s nationwide housing prices are due out, both of which will provide very little volatility.
Data to watch:
04:30 JPY All Industry Activity Index (MoM) (Mar)
08:30 GBP Retail Sales ex-Fuel (MoM) (Apr)
08:30 GBP Retail Sales ex-Fuel (YoY) (Apr)
08:30 GBP Retail Sales (YoY) (Apr)
08:30 GBP Retail Sales (MoM) (Apr)
12:30 USD Durable Goods Orders ex Transportation (Apr)
12:30 USD Durable Goods Orders ex-defence (Apr)
12:30 USD Nondefense Capital Goods Orders ex Aircraft (Apr)
12:30 USD Durable Goods Orders (Apr)