Trump teases ahead of Congress
Sterling remained under pressure in early European trading yesterday with a decline below 1.2400 against the Dollar and 1.1710 against the Euro. The latest GfK consumer confidence reading was edged lower to -6 for February from -5, but the Lloyds Business Barometer strengthened to the highest level for 11 months at 40 from 29 previously. The data suggested consumer spending could be vulnerable, potentially offset by wider support for the economy.
There were further concerns surrounding the political outlook amid speculation over a possible second Scottish referendum, although reports were denied by a government spokesman. There were also expectations of month-end selling which tended to undermine Sterling sentiment to some extent. Sterling gradually recovered half a cent against the Dollar and Euro but faded by this morning with markets still wary over month-end volatility.
The US dollar reversed sharply across the board after the US President Trump reiterated his plans to boost infrastructure and said that the White House is planning to increase defence spending by $ 54bn, which will be offset with significant cuts to foreign aid and reductions in agency spending. GBPUSD traded at 1.2470 following US economic data released yesterday afternoon which showed durable goods orders rose 1.8% in January, while ex-transport orders contracted -0.2%. However, the rate then fell off due to the announced defence spending boost, reversing to 1.2430.
It will be a key day for the buck in light of significant releases in the US docket and the State of the Union speech by President D.Trump. Market participants have been permanently disappointed by Trump and his reluctance to give further details on his potential economic measures, particularly on the fiscal side, all echoing in the recent choppiness around the US Dollar. The market remains cautious ahead of Trump’s first address to Congress today whereby Investors will watch closely for any additional details over his pro-growth economic policies.
On the economic data front, preliminary (second estimate) US GDP print for the fourth-quarter of 2016, followed by Chicago PMI and Conference Board’s Consumer Confidence index.
The European Commission’s EMU economic sentiment indicator inched up the highest level since March 2011. February’s reading rose from 107.9 to 108.0, thanks to more optimism in the industry and the services sector and despite weaker readings among consumers and in the retail underpinning growth hopes.
The latest Euro-zone money supply growth data was in line with consensus expectations as growth slowed slightly to 4.9% from 5.0% previously while private loan growth was slightly stronger for the month at 2.2% from 2.0% previously.
The latest French Presidential election opinion poll registered a marginal improvement for Macron providing net Euro support as concerns surrounding a potential Le Pen victory faded slightly.
Data to watch: 7.45am French GDP, French Consumer Price Index (EU Norm). 1.30pm US Q4 Gross Domestic Product. Personal Consumption Expenditures & Core PCE. 2pm Case-Schiller Home Price Indices. Consumer Confidence, Chicago Purchasing Managers Index.