Steady inflation boosts real wages
Headline UK consumer inflation remained at 1.9% for March, missing forecasts of a slight increase to 2.0% and the core rate also remained unchanged at 1.8%. Expectations of a Bank of England (BoE) interest rate hike this year dipped. House prices increased by just 0.6% in the year to February according to ONS data, the weakest pace of increase in 6.5 years. Wages rose by 3.4%, showing sustained real wage growth although weekly pay is still below levels seen before the financial crisis.
Sterling slipped slightly following the data due to a lack of buying interest and volatility remained lower despite the forthcoming Easter break increasing the potential for position adjustments. Oil prices dipped and there was no impetus from politics adding to a perceived lack of trading opportunities. Sterling dropped below 1.3050 against the Dollar while the Euro held above 1.1560.
This morning’s Retail Sales data will be the last significant UK data of April, and the Bank holiday weekend brings the risk of position adjustments today.
The overall US trade deficit narrowed to $49.4bn for February from $51.1bn the previous month which helped underpin sentiment and also triggered a slight upgrade to first-quarter GDP estimates.
Philadelphia Federal Reserve (Fed) President Harker stated that one rate increase at most was likely in 2019 with one in 2020. The fact that a rate hike was still potentially on the table for this year provided some Dollar support. The Fed’s Beige Book reported slight-to-moderate growth in the period to early April with most districts reporting little change, although three reported stronger activity. Employment remained firm with further reports of labour shortages while prices increases were modest.
The US Dollar was able to regain some ground against commodity currencies which also hampered the Euro and it settled just below 1.1300 and against Sterling, currently sitting around 1.3020
Eurozone consumer inflation printed in line with forecasts at 1.4% for March with the core rate at 0.8%. European Central Bank (ECB) officials attempted to take an upbeat stance with Hansson stating that there was no doubt that growth would pick up in the second half of 2019 while Nowotny commented that growth forecasts would not be revised down significantly in June. The market impact was limited as both officials are usually hawkish in outlook and the Euro failed to capitalise.
The latest Eurozone PMI data will be watched closely this morning, especially after very weak data last month and the Euro will vulnerable to fresh selling if there is no evidence of recovery. Conversely, good figures would boost confidence into the Easter holidays.
Data to watch:
01:30 AUD Fulltime Employment (Mar)
02:00 CNY FDI – Foreign Direct Investment (YTD) (YoY) (Mar)
06:00 EUR Producer Price Index (MoM) (Mar) (Germany)
07:30 EUR Markit Manufacturing PMI (Apr) (Germany)
07:30 EUR Markit Services PMI (Apr) (Germany)
07:30 EUR Markit PMI Composite (Apr) (Germany)
08:00 EUR Markit PMI Composite (Apr)
08:00 EUR Markit Manufacturing PMI (Apr)
08:00 EUR Markit Services PMI (Apr)
08:30 GBP Retail Sales ex-Fuel (MoM) (Mar)
08:30 GBP Retail Sales ex-Fuel (YoY) (Mar)
08:30 GBP Retail Sales (MoM) (Mar)
08:30 GBP Retail Sales (YoY) (Mar)
12:30 USD Retail Sales ex Autos (MoM) (Mar)
12:30 USD Retail Sales Control Group (Mar)
12:30 USD Retail Sales (MoM) (Mar)
12:30 USD Initial Jobless Claims (Apr 12)
12:30 USD Continuing Jobless Claims (Apr 5)
12:30 USD Philadelphia Fed Manufacturing Survey (Apr)
12:30 CAD Retail Sales ex Autos (MoM) (Feb)
12:30 CAD Retail Sales (MoM) (Feb)
13:45 USD Markit Manufacturing PMI (Apr)
13:45 USD Markit Services PMI (Apr)
13:45 USD Markit PMI Composite (Apr)
16:10 USD Fed’s Bostic speech
23:30 JPY National Consumer Price Index (YoY) (Mar)
23:30 JPY National CPI ex-Fresh Food (YoY)
23:30 JPY National CPI ex Food, Energy (YoY) (Mar)