Pound Performs, Dollar better player.
The US Dollar is on the front foot as trade talks between the US and China made some progress towards a better relationship and trading partnership. The direction for the US Dollar has already been dictated by the Peoples Bank of China’s activity in the market overnight.
There were no significant US data releases during the day, although there was further speculation that the Federal Reserve would issue a less dovish statement as next week’s policy meeting which also added to the USD strength.
Markets continued to focus on the outlook for monetary policy in other major economies. The dollar continued to gain yesterday late last night with the currency index hitting 23-month highs.
Wednesday was yet another bad day for the single currency as the market continued to see significant dollar support. Combined with the ECB being widely expected to continue its dovish stance, the dollar gained and the currency index hit 23-month highs. The pair fell to 1.1150, a 22-month low, and has only seen a slight recovery this morning.
German data again declined, the IFO business confidence index this time, with a monthly dip in both current conditions and expectations. As a result of this, the market felt a fresh wave of uncertainty over the growth outlook for Germany and therefore the Euro-zone which undermined Euro sentiment. This was not helped by the German 10-year bond falling into negative territory.
Very little data is due today for the Eurozone, with Spanish unemployment and the UK’s CBI industrial trends survey being the early releases. Neither are expected to have a significant impact on traders. At lunchtime, the ECB’s De Guindos is giving a speech which may prove to be the only piece of data that will see a bit of volatility.
UK government borrowing data showed greater than forecast on the month, but the 2018/19 fiscal deficit fell to the lowest level since 2002, dropping from last year’s £41.9bn to £24.7bn. The data underpinned Sterling sentiment enabling a half-cent gain on the Euro, but wider US strength prevented a brief recovery above 1.2950 from settling. GBPUSD later dipped to 2-month lows of around 1.2900 after the European markets closed. As oil prices corrected lower the Pound’s relatively bargain price appeared the only stimulation for buying.
The backbench 1922 committee voted against changing a law that would enable another vote of no confidence as early as June, but instead pressed the Prime Minister to set a resignation date if the Brexit Withdrawal Agreement was not approved. There were also reports that Theresa May would bring her Withdrawal Agreement back for meaningful vote 4 next week, this lady’s not for turning. Sterling volatility remains low today, starting out just above 1.2900 on the Dollar and 1.1560 on the Euro.
Data to watch
12:30 USD Initial Jobless Claims (Apr 19)
12:30 USD Nondefense Capital Goods Orders ex Aircraft (Mar)