Yesterday’s Brexit negativity could spill into Super Thursday
There were some pressure relieving figures for the UK yesterday as March’s manufacturing production came in showing a growth of 0.1%. Although it was not the 0.4% figure predicted, manufacturing production grew from February and was an extreme improvement on the revised -0.9% previously. Industrial production also missed expectations but did show growth for the month at 0.3%. Sterling weakened against the Dollar at first, as the figures did not meet expectations, however the Pound started to strengthen and continued to do so until the European close.
Today is the penultimate Bank of England Monetary Policy Committee (MPC) vote on potential interest rate changes before the upcoming EU referendum. Following Chancellor Osborne’s comments on a potential ‘Brexit’ yesterday, expect a 9-0 vote in favour of no change, with interest rates continuing at the current lows of 0.5%. Currency traders will have all eyes on Mark Carney when he speaks at 12.45pm. As recent economic data from the UK has been consistently poor, any dovish comments from Carney will likely lead to weakness in Sterling.
There was no top tier data from the US on Wednesday, which reduced trading volumes and left the markets struggling to find a clear directional bias for all Dollar crosses (USDGBP, USDEUR etc). There is a feeling of caution ahead of Friday’s important retail sales figures and the University of Michigan consumer confidence survey. US initial jobless claims are due for release today. Although not market moving data, the figure will be used to gauge the strength of the US labour market. Also, investors will listen closely to comments from the Fed speakers today, looking for any hints on potential Fed policy as the June meeting comes into greater focus.
Cable (GBPUSD) continues to trade in a narrow range, with Dollar bulls failing to push the pair through the 1.4390 level yesterday morning and the Pound bulls failed to hold the pair above the 1.4470 level later in the day.
The pair opens this morning at 1.4448, fractionally above Wednesday’s opening of 1.4442. The Dollar’s six day winning streak against the Euro came to an end yesterday, as the pair broke through the 1.1440 level for the first time since last Friday. The Dollar did claw back some of the losses in the US session, but the Euro still posted gains of 0.47% for the day. It opened at 1.1426 this morning.
The Euro strengthened against the Pound during yesterday’s European trading session as British data failed to meet expectations. This resulted in the Euro trading half a percent higher against Sterling, and ended the day at around the low 1.26 levels. The GBPEUR chart shows a sideways movement from Thursday last week, ranging from as low as 1.2614 up to 1.2720.
The German wholesale price index for the month of April has printed this morning at 0.3%, equalling the March result. Data from the Eurozone continues – we await the results of the Industrial production figures for March. Early signs show that an improvement in February’s figures are expected as consensus is at 1.1% , 0.3% higher than February’s 0.8% result.
Data to watch: 12pm MPC Bank Rate Votes, Official Bank Rate. 12.45pm Bank of England Governor Mark Carney speaks. 1.30pm US Unemployment Claims, US Import Prices. 4.45pm Federal Open Market Committee (FOMC) Member Rosengren speaks. 6.30pm FOMC Member George speaks.
Still unsure of how British Expats stand should Brexit go ahead? Solicitors Turcan Connell gave us the lowdown. Read all about it here.