Peak levels of uncertainty
UK current account data printed better than expected with only a £5.6bn deficit in Q4 of 2019, down from £19.9bn previously. The anomalous result has largely been attributed to a precious metal exports boom so the underlying concerns remain. Concerns rose over the UK/EU trade outlook with pressure for the transition period to be extended and uncertainty remains at peak levels. The Pound slipped a little after the open, although the move reversed in the run up to the US open and there wasn’t much evidence of month-end selling. Positioning was still a significant factor but largely supported the Pound. Starting below 1.2300 on the Dollar, Sterling finished above 1.2400. The Euro also declined to lows near 1.1350, but Sterling dipped again after the European close as volatility increased once again. Fragile global risk appetite has held Sterling back this morning as it starts out below 1.2400 on the Dollar and the Euro near 1.1235.
US consumer confidence declined sharply to 120.0 for March from 132.6 the previous month, although this was above consensus forecasts. There was also a small decline in the current conditions index with a sharp decline in expectations due to the expected impact of the coronavirus outbreak.
The Chicago PMI manufacturing index declined slightly to 47.8 from 49.0 previously, but this was above consensus forecasts of 44.0. There was a notable decline in new orders and the headline figure was inflated by further delays in supplier deliveries as overall confidence in the outlook dipped. The Federal Reserve (Fed) announced the introduction of further swap lines for overseas central banks. The latest move will cover the repurchase market in order to improve the functioning of markets and lessen the risk of disorderly sales by overseas holders of US assets.
German March unemployment increased 1,000 for March compared with consensus forecasts of 23,000, but the total will inevitably increase in the near term. According to the flash data, the Euro-zone CPI inflation rate declined to 0.7% for March from 1.2% previously and below forecasts of 0.8%. The underlying rate declined to 1.0% from 1.2%.
According to the latest data release this morning, Germany’s Retail Sales figures arrived +1.2% MoM in February versus 0.0% expected and +0.9% last. On an annualized basis, the German Retail Sales jumped 6.4% in February versus +1.8% seen in January and +1.5% expected. As of writing, the common currency remains under pressure around the key 1.1000 level against its Dollar counterpart. With an abundance of data for Euroland this morning, a directional bias could easily be formed by close of business today.
Data to watch
12:15 – USD – ADP Non-Farm Employment Change
14:00 – USD – ISM Manufacturing PMI