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More Brexit, more May

More Brexit, more May

UK industrial production figures showed  0.6% growth in February beating modest forecasts of 0.1% growth, but the annual increase was slim, at 0.1%. Construction figures also beat forecasts, although the trade deficit was wider than expected. The data did add a little pep to the Pound although global moves tended to dominate, especially in light of the EU Summit. Sterling moved above 1.3100 against a weaker Dollar and the Euro settled around 1.1630. The RICS housing index recovered slightly to -24 for March from -30, but it had little impact on currencies.

The EU sanctioned a six-month Article 50 extension, due to finish on October 30, with the option of an early finish should a Withdrawal Agreement be approved. The reaction was muted as the market had already priced in that ‘no-deal’ would be avoided. The concerns that investment would continue to be harmed by uncertainty remain. Domestic politics could become even more chaotic with Theresa May insisting she’ll see through the first phase of talks.


The US currency came under sustained pressure yesterday afternoon. According to minutes from March’s Federal Reserve (Fed) meeting, a majority of policymakers expected interest rates to remain steady during 2019, although some members thought that a modest hike in rates could be warranted later this year.

A majority of the Fed committee reiterated that the patient stance was needed given uncertainties surrounding the global economy and financial markets. Several policymakers also wanted to stabilise the level of reserves by resuming purchases of Treasuries once the balance sheet runoff is completed. The rhetoric was generally dovish, but the Dollar had already lost ground which curbed further selling. The US currency stabilised on Thursday, but underlying sentiment remained fragile and the Euro held around 1.1280. 


Yesterday was a tough day for the single currency. European Central Bank’s (ECB) President Draghi piled downward pressure on the Euro by admitting that risks are materialising. His negative tone turned out to be the main factor in a Euro slide, by confirming that slower growth momentum and wider global headwinds are unlikely to relent on the region. Interest rates were maintained at zero and are expected to remain there for 2019. Versus the Dollar the Euro hit 1.1230 after an initial Dollar rally, but later regained some ground.

Today sees German CPI figures for March, with the harmonized index year-on-year for March being of particular interest for the market. This is followed by French CPI numbers and then the Spanish bond auction. The fallout to the EU meeting over Brexit will be interesting, with May set to return to Parliament and face her divided Conservative party.


Data to watch

01:30 CNY Consumer Price Index (MoM) (Mar)
01:30 CNY Producer Price Index (YoY) (Mar)
01:30 CNY Consumer Price Index (YoY) (Mar)
02:30 AUD RBA’s Debelle speech
06:00 EUR Harmonized Index of Consumer Prices (YoY) (Mar) (Germany)
12:30 USD Producer Price Index ex Food & Energy (YoY) (Mar)
12:30 USD Initial Jobless Claims (Apr 5)
12:30 USD Continuing Jobless Claims (Mar 29)
13:30 USD Fed’s Clarida speech
13:40 USD Fed’s Bullard speech
17:00 CAD BoC’s Wilkins speech
20:00 USD Fed’s Bowman speech
22:30 NZD Business NZ PMI (Mar)
22:45 NZD Electronic Card Retail Sales (MoM) (Mar) 

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