Market waits for US GDP figures
UK CBI retail sales bounced back sharply with the first positive results for five-months, 13 for April from -18 the previous month. Business outlook opinions were also optimistic for May (The month not the PM). It is still uncertain whether parliament will be presented with the Withdrawal Bill again next week and some reports indicated that Theresa May is keen to do so as soon as possible.
Sterling failed to gain any momentum with investors holding off for any positive developments to trigger buying stimulus. Dollar strength again pushed the Pound down, this time bottoming out below 1.2870 before recovering to the 1.2900 area. The Euro faded slightly allowing the Pound back to the 1.1580 area. Markets remain wary of higher volatility next week given potentially important political and economic events.
After a period of consolidation, it was a race to the bottom for the G10 currencies against the Dollar. The US Dollar index moved to its highest level for this year and with world economies (ex-US and China) slowing down, the recent rally may have more room to run.
An advanced report on US manufacturers’ shipments, inventories and orders, released yesterday morning, surprised the market to the upside with new orders for durable goods increasing by 2.7% in March.
The market has now turned its focus on tomorrow’s Q1 GDP report card. Meanwhile, central banks around the world are cautious. The Bank of Japan is the latest to follow the steps of Bank of Canada in maintaining its key monetary policies unchanged. The market is searching for a new equilibrium after the US signalled that it will not extend waivers on Iranian oil exports.
The EURUSD hit its lowest level since May/June 2017 yesterday off the back of a strong Dollar. Whilst the Dollar went from strength to strength, the Euro was undermined by yield considerations whilst there was also some underlying concerns in the market over this weekend’s general election in Spain. Investors also seem to be cautious ahead of S&P’s expected announcement on Italy’s credit rating today. Any negative news will cause downward pressure and there have already been signs that there has been an increase in purchases of Euro put options (giving investors the right to sell a specific amount, at a specific price at a specific time).
There is very little data due today in the Eurozone, with French consumer confidence due to first thing. This is followed by the Swiss SNB’s Chairman Jordan’s speech and then mortgage approvals out of the UK. Not much volatility is expected around these pieces of news.
Data to watch
08:00 CHF SNB’s Chairman Jordan speech
12:30 USD Gross Domestic Product Price Index (Q1)
12:30 USD Gross Domestic Product Annualized (Q1)
12:30 USD Personal Consumption Expenditure Price (QoQ) (Q1)
12:30 USD Core Personal Consumption Expenditures (QoQ) (Q1)
14:00 USD Michigan Consumer Sentiment Index (Apr)