It’s Groundhog day….again
Weaker sentiment meant Sterling drifted steadily lower throughout the day as market unease lingered over the ongoing deadlock in parliament. The DUP’s continued refusal to support the government’s deal has hampered the Pound. Late in the afternoon, the government announced that it would hold another meaningful vote on Friday, covering just the Withdrawal Agreement in an attempt to secure a Brexit extension to May 22nd.
An underlying lack of confidence in the global growth outlook drew support into defensive assets and consequently held Sterling back. European Central Bank (ECB) President Mario Draghi stated that markets were not pricing in the full risk of a ‘no-deal’ Brexit. Overall, the Pound dipped to lows below 1.3050 while the Euro pushed above 1.1630.
Sterling has rallied slightly this morning, but support is limited on the expectation that the government will lose the Brexit vote. Month-end selling is also a potentially negative factor, as is caution over further choppy trading.
The final version of US GDP for Q4 was revised down slightly to 2.2% from 2.4% but initial jobless claims dropped to 211k which continued to indicate a very strong labour market. Fed officials were broadly neutral in their comments; vice-chair Richard Clarida reiterated that the Fed would take a patient stance amid a weaker tone in global growth. Although confidence in the US outlook remained fragile, the Dollar rose into the US open due to a lack of confidence in other major currencies and defensive US demand on liquidity grounds. Markets are wary of choppy month-end trading today with the Euro rallying only slightly after a strong German retail sales release.
EURUSD saw a fifth day of weakening out of the previous six. Economic data out of the EU region was weak yet again. EU sentiment declined, with deterioration in both services and industrial, which is only serving to support the general feeling of unease surrounding the growth outlook. German inflation was below consensus meaning both pieces of data seemed to confirm the ECB’s dovish statement. There was a very brief respite with Eurozone money supply growth strengthening, but the effect on trading was negligible.
On the economic docket today is the German import price index, UK housing prices, French consumer spending, Spanish retail sales and GDP numbers, Swiss KOF leading indicator, German unemployment rate and unemployment change, UK GDP figures and Italian CPI numbers. Most importantly, however, will be the UK Parliament’s vote on Brexit at lunchtime.
Data to watch:
07:45 EUR Consumer Price Index (EU norm) (YoY) (Mar) (France)
08:00 CHF KOF Leading Indicator (Mar)
08:55 EUR Unemployment Rate s.a. (Mar) (Germany)
08:55 EUR Unemployment Change (Mar) (Germany)
09:30 GBP Gross Domestic Product (YoY) (Q4)
09:30 GBP Gross Domestic Product (QoQ) (Q4)
12:30 USD Personal Spending (Jan)
12:30 USD Core Personal Consumption Expenditure – Price Index (YoY) (Jan)
12:30 USD Core Personal Consumption Expenditure – Price Index (MoM) (Jan)
12:30 USD Personal Income (MoM) (Feb)
12:30 CAD Gross Domestic Product (MoM (Jan)
13:25 USD Fed’s Williams speech
13:30 GBP UK Parliamentary Vote on Brexit
13:45 USD Chicago Purchasing Managers’ Index (Mar)
14:00 USD Michigan Consumer Sentiment Index (Mar)
14:00 USD New Home Sales (MoM) (Feb)
14:30 USD Fed’s Kaplan speech
16:05 USD Fed’s Quarles speech