Trump honeymoon ends just as May’s test due to start
The UK mortgage approvals data printed weaker than expected, but with market attention elsewhere there was no significant impact. The Pound continued to test resistance above the 1.2500 level against the Dollar and was unable to break through the 1.1615 mark versus the Euro.
The latest CFTC data recorded a marginal shift in Sterling positioning to register a new record high, maintaining the potential for a position squeeze. Overall positioning shifts are likely to be very important during the week, especially with month-end looming.
Legislation to restore sovereignty over UK laws is due to be published on Thursday, following Article 50’s triggering on Wednesday, which will keep political events in focus.
US durable goods orders rose 1.7% for February, although core orders showed more moderate growth of 0.4%. PMI manufacturing and services dipped slightly with the latter at 52.9 from 53.8. This was the lowest reading for six months with subdued increases in output prices which dampened growth hopes to some extent.
Political developments across the pond are front and centre after Trump and the House Leadership failed to gain support for the new American Health Care Act. Market opinion is split after the legislation was withdrawn due to a lack of support. On one hand, this is a blow to Trump’s image as the deal-maker, on the other, the path is now clear to focus on tax reform.
Eurozone PMI printed strongly on Friday with the manufacturing index rising to 56.2 for March from 55.4 previously, while the services-sector index strengthened to 56.5 from 55.5 previously. The composite index strengthened to its highest level for almost six years and there was further upward pressure on prices.
German Chancellor Angela Merkel triumphed in the Saarland state election, increasing confidence in German political stability ahead of the forthcoming general election.
The latest CFTC data recorded a further decline in short Euro positions to just under 20,000 the previous week. This was the lowest net short positioning since May 2014, illustrating an underlying shift in sentiment. Weaker Dollar sentiment this morning means that the Euro opens at fresh three-month highs near 1.0850.
Data to watch: 8am GER IFO – Current Assessment, Expectations and Business Climate (Mar). 2:30pm USD Dallas Fed Manufacturing Business Index (Mar).