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Trump and Putin tensions rise

Trump and Putin tensions rise

GBP
UK Manufacturing production declined in February by 0.2% and the annual increase only mustered 2.5% against expectations of 3.3%. Industrial production fell short of expectations with a modest 0.1% increase for February and Construction data was also weak, although there was a significant narrowing of the trade deficit which provided some relief to Sterling.

The NIESR estimated GDP growth of 0.2% in the three months to February from a downwardly-revised 0.1% previously which maintained concerns surrounding the growth outlook even with distortions caused by “The Beast from the East”. Despite flimsy data and fragile risk appetite, oil prices at the highest level for over three years gave significant shielding to the Pound. The trade-weighted index hit the strongest level since June 2016’s Brexit vote.

Sterling failed to hold above 1.4200 against the Dollar while the Euro found support below the 1.1495 level. The BCC reported strong manufacturing exports, although domestic demand was subdued and pricing pressures eased slightly with Sterling holding below key resistance levels on Thursday.

USD

US consumer prices dropped 0.1% for March with energy prices decreasing as the year-on-year rate met market expectations with an increase to 2.4% from 2.1%. Core prices rose by 0.2%, meeting consensus forecasts, with the annual rate increasing to 2.1% from 1.8% previously.

Following the data, minutes from March’s Federal Reserve policy meeting revealed that all policymakers agree they expect inflation to rise further which will warrant tightening of policy. Further, it is clear they all believe the economic outlook has improved which will be reflected in a greater rise in the Fed Funds rate over the next few years. That said, there were concerns for downside risk with any retaliatory trade action.

What is currently stealing the headline for the Dollar, however, is the developing situation with Syria. The recent chemical attack has provoked a reaction from America to threaten with air strikes set to be more devastating than last year’s. This has lead to increased tensions with Russia who have warned the US against any action, going as far to shoot any US missiles.

It was a mixed tone for the Dollar with hawkish comments from the FOMC minutes and concerns over conflict with Syria. The Euro edged down towards 1.2350 from highs near 1.2400. Cable saw a choppy trading session to close 1.4185.

EUR

The Euro is edging higher again today after comments from another European Central Bank (ECB) board member suggested that monetary policy would likely be tightened further in the not-too-distant future. The topic of ECB monetary policy looks set to dominate the Euro’s movement in the weeks ahead, as we approach another ECB meeting where they could further adjust their forward guidance, potentially confirming an end to their QE program.

Today, the Euro will be very dependant on the tone of the ECB minutes, due today at 12:30 BST. The hawkish tone could boost odds of an early rate hike and put a bid under the common currency.

Data to Watch:

07:30 GBP MPC Member Broadbent Speech
07:45 ITL Consumer Price Index (EU norm) (YoY) (Mar)
09:30 GBP BOE Credit Conditions Survey
10:00 EUR Industrial Production s.a. (MoM) (Feb)
12:30 EUR ECB Monetary Policy Meeting Accounts
13:15 EUR ECB Cœuré Speech
13:30 USD Continuing Jobless Claims (Mar 30)
13:30 USD Initial Jobless Claims (Apr 6)
17:00 EUR German Buba President Weidmann speech
20:00 GBP BOE’s Governor Carney speech
22:00 USD FOMC Member Kashkari Speech

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