Sterling dips, but only temporarily
During the European session, there was heavy Sterling selling pressure after GlaxoSmithKline announced that it would purchase a 36.5% stake in Novartis’ consumer healthcare division in a $13bn cash deal.
As a result, the UK currency moved significantly lower during the European session with a retreat to lows below 1.4100 against the Dollar while the Euro made gains to lows of 1.1372. Sterling was also sold heavily against the Swiss Franc as lows of 1.1372 were seen but levels still sit at the highest since the announcement of Brexit back in 2016.
Further, speculation surfaced that Sterling was being undermined by month-end selling and the fast-approaching holiday period leading to profit taking from investors and market traders after recent gains.
The UK currency did see respite late in the trading session with hopes for an Irish border agreement boosting confidence.
It was a relatively quiet day for the Dollar yesterday as US consumer confidence declined slightly to 127.7 for March whilst the Richmond Fed index decreased from a strong reading of 28 previously.
Further, Atlanta Fed President Bostic supported plans to raise interest rates gradually, although he did make comments on the recent US tax cuts and increased government spending stating he was uncertain about the implications.
We have also witnessed increasing risk-on mood after North Korean leader Kim Jong-un said in China that he is ready to meet with President Trump. This is accompanying the outflows from safer assets, pushing USDJPY higher and therefore supporting the demand for the Buck.
Looking ahead, US GDP figures for the October-December period are due seconded by February’s Trade Balance and Pending Home Sales. Additionally, the EIA will publish its weekly report on US crude oil inventories.
There was a busy but uneventful economic calendar for the single currency yesterday. Eurozone money supply data did not meet forecasts with M3 growth slowing to 4.2% in the year to February from 4.5% previously. Growth in private loans was held at 2.9%. Further, a slowdown in the Economic Sentiment Index to 112.6 for March from 114.2 previously maintained some concerns that regional growth momentum was fading.
Outside of the data, European Central Bank (ECB) council member Nowotny stated the reduction in asset purchases should be gradual whilst fellow member Makuch believes the lack of an upturn in inflation does not warrant the winding in of the programme yet. Liikanen also made comments on inflation remaining lower than expected even if growth is robust.
The relatively dovish comments overall undermined the Euro as the single currency dipped to below the 1.2400 level against the Dollar.
Data to Watch:
06:00 EUR Gfk Consumer Confidence Survey (Apr)
12:30 USD Gross Domestic Product Annualized (Q4)
12:30 USD Gross Domestic Product Price Index (Q4)
12:30 USD Core Personal Consumption Expenditures (QoQ) (Q4)
12:30 USD Personal Consumption Expenditures Prices (QoQ) (Q4)
14:00 USD Pending Home Sales (MoM) (Feb)
16:00 USD FOMC Member Bostic speech