Sterling Up On Strong Data
The Confederation of BritishIndustry’s industrial trends survey revealed a very strong quarterly improvement with the optimism survey printing it’s highest result since 1973. Also the data revealed a strong recovery in “investment intentions” which will strengthen underlying confidence in the Pound. Unfortunately the orders index edged lower, falling short of consensus forecasts. Sterling was held in check for most of the morning before staring to lose ground as the US market opened
News that the EU would finally vote on the UK-EU trade deal next week had little market impact but renewed speculation that the EU would substantially reduce the vaccine gap with the UK undermined Sterling support. The Euro pushed below the 1.1495 level before retreating to 1.1525 and Sterling suffered losses against the Dollar, slipping to lows below 1.3850.
GfK UK consumer confidence index rose to a 13-month high but still failed to match consensus forecasts. Retail sales increased 5.4% for March, well above market expectations of 1.5%, while government borrowing was above forecasts. Sterling opens above 1.3850 against the Dollar with the Euro around 1.1525.
The Dollar surged within US trading hours, as Wall Street changed course and edged sharply lower. The catalyst was a late reaction to a headline indicating that US President Joe Biden is planning a capital gains tax hike to as high as 43.4%. Meanwhile, Republican senators proposed a$ 568 billion framework that includes funding for bridges, airports, roads and water storage that does not include tax increases.
US Treasury yields ticked lower with the sour sentiment but remained within the previous weekly range of between 1.2080 and 1.20.
The ECB made no changes to interest rates following the latest policy meeting, in line with expectation, and in line with consensus forecasts. There were also no changes to the asset-purchase programme which will be maintained until at least March 2022.
Bank President Lagarde stated that vaccines underpin expectations of a firm rebound in economic activity, but also stated that the near-term future is bleak with a high degree of uncertainty. She also stated that it would be good to move policy in tandem with the Federal Reserve, although this was not likely and there was no rhetoric surrounding any tapering of purchases. The Euro drifted lower following the ECB rhetoric amid a lack of hawkish factors and no mention of tapering.
As of writing, the Euro currently trades around the 1.2035 mark against its US counterpart.
Data to watch
07.00 GBP – Retail Sales
08.15 EUR – French Flash Services PMI
08.30 EUR – German Flash Manufacturing PMI
08.30 EUR – German Flash Services PMI
14.30 EUR – President Lagarde Speaks