Much Ado About Russia
Mortgage approvals decline unexpectedly to 38,100 in February and credit card borrowing remained subdued, although there was a recovery in lending to non-financial companies. Sterling sentiment remained positive following last week’s economic data and political developments, although markets were also wary that favourable economic developments had been priced in, particularly expectations of a May rate hike.
Global trends dictated the trading with a particular focus on equity markets. Risk appetite improved to provide net support towards the close of play. The Pound posted seven-week highs near 1.4250 against a fragile Dollar while the Euro strengthened to push Sterling just below the 1.1430 area. The market will be wary of potential month-end position adjustment over the next few days with the impact liable to be compounded by the Easter holidays.
In a relatively empty economic calendar, there were no significant developments. The Chicago Fed National Activity Index improved to 0.88 from 0.02 while the Dallas Fed manufacturing index weakened to 21.4 for March from 37.2 previously. The prices index also dropped off slightly despite upward pressure on prices paid.
The US Dollar is weaker today as it fell against European majors due to the trade war with China taking a backseat to the developing diplomatic crisis with Russia. The coordinated expulsion of over 100 Russian diplomats from allied countries has increased investor risk appetite leading to the resumption of selling the Dollar.
Further, US Treasury Secretary Mnuchin said he is “cautiously hopeful” that China tariffs can be avoided with an optimistic approach to reaching an agreement.
The Euro is making solid gains with little in the way of data aside from decent growth figures that were confirmed in France and the Netherlands.
The European currency was among the top performers of the day yesterday. Against the Swiss Franc, the Euro rose above 1.1750 for the first time since mid-January. Comments from European Central Bank (ECB) official Jens Weidmann about the possibility of a rate hike around mid-2019 also added support to the Euro.
This week, the highlight will be German data on unemployment and inflation. Data-wise today in Euroland, we see M3 Money Supply and Private Loans are seconded by several gauges of confidence and sentiment.
Data to Watch:
09:00 EUR Business Climate (Mar)
13:00 USD S&P/Case-Shiller Home Price Indices (YoY) (Jan)
15:00 USD FOMC Member Bostic speech