Oven-ready negotiation stance expected
The CBI’s Distributive Trade survey was little changed at 1% for February, below the 4% expected and a small decline in March sales is anticipated. The orders component was weak but investment intentions saw a notable recovery with a net balance of 26% planned increased investment; the strongest figure since 2010. The stark change from -38% the previous month represents the sharpest monthly improvement on record and fed into Sterling support.
EU Ministers rubber-stamped their trade talks mandate with the UK and there was some relief at a slightly less confrontational stance than predicted, although Monday’s kick off will still herald some very tough negotiations. The Pound moved to test resistance above 1.3000 on the Dollar and the Euro more than 0.5% to near 1.1976. Poor global risk appetite this morning has triggered a Sterling correction and we await the publication of the government’s own trade talks negotiation stance at some point today.
US consumer confidence was little changed at 130.7 for February from a revised 130.4 the previous month, although this was below consensus forecasts. A significant decline in the current conditions index was offset by a stronger reading for expectations. Within the data, confidence in the labour market was slightly weaker for the month.
The Richmond Federal Reserve (Fed) manufacturing index declined sharply to -2 for February from 20 previously with new orders also reverting to negative territory. Employment indices were mixed as skills shortages continued while prices paid increased more sharply. In contrast, the Philadelphia Fed non-manufacturing index strengthened to 36.1 for February from 23.5 previously with a stronger reading for new orders. This followed a strong reading for the manufacturing index last week. Fed Funds futures indicated an 85% chance of an interest rate cut by the end of July with a 50% chance of two cuts. Dallas Fed President Kaplan stated that he was not considering a rate cut at this time while Fed vice-chair Clarida stated that the central bank is closely monitoring the situation.
Expectations of lower interest rates continued to unsettle the dollar and the Euro recovered against the Greenback from intra-day losses to move to highs around 1.0890 before consolidation around 1.0870.
After opening higher, German equities quickly lost ground again yesterday as risk appetite weakened further. The German 10-year bond yield declined to 4-month lows just below -0.50%, although there was little overall change in yield spreads.
The Euro against the Dollar stalled its recent move from yearly lows but failed ahead of the 1.0900 level.The mentioned figure should now act as a key point for the short term. Breaking above, the potential to lift higher to 1.0955 could be achievable. As of writing, the Euro finds itself at the 1.0885 level against the Dollar.
Data to watch
15:00 – USD – New Home Sales
15:30 – USD – Crude Oil Inventories