Previous Day's Market Highlights
Sterling gained on Tuesday as markets began to price in a ‘softer’ Brexit outcome after the Prime Minister’s address in which the Leader of the Opposition was invited to join unity talks as the PM tried to “break the logjam” over the issue. Such talks will require a further extension of the Article 50 negotiating period, with focus on the amendable political declaration to lay out plans for the UK’s future relationship with the EU. Although the Government would prefer any extension to end by 22nd May to avoid participation in European elections, the final decision on the duration of any extension will be made by the EU at next Wednesday’s summit. Also helping the pound was a reiteration of the Prime Minister’s desire to leave with a deal, seen largely as the end of prospects of a no-deal exit, with clear desire from all party leaders to avoid such an outcome, though it remains the legal default. Some cabinet members are however against this stance, therefore resignations are possible over the coming days. Over the course of the day, the pound gained 0.5% against both the euro and the dollar, closing above the key $1.31 and €1.17 levels.
Elsewhere, the euro traded flat, with the single currency struggling to break away from the $1.12 mark in either direction. A lack of data kept the euro relatively rangebound, however the UK’s moves towards avoiding a no-deal Brexit did see the single currency find support. PPI figures were released in line with forecasts, at 3% on a year-on-year basis in February. The dollar was also largely unmoved, with markets unfazed by a fall in durable goods orders last month. In contrast, the antipodeans struggled, with both the Aussie and Kiwi dollars losing ground. The Aussie fell by around 0.6%, continuing its slump after the RBA’s latest policy announcement, while the Kiwi fell 0.8% as markets continued to react to a slump in business confidence and increased odds of an RBNZ rate cut.
Elsewhere, equity markets struck more of a subdued tone after a blistering start to the quarter on Monday. The pan-European Stoxx 600 gained 0.3%, while the benchmark US S&P 500 closed unchanged. Meanwhile, oil prices continued to gain with support stemming from an easing in concerns over future demand. Both Brent and WTI gained ground, with the latter rallying by more than 1% to a new year-to-date high.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today sees a busy economic calendar with key releases from the UK, eurozone and US.
From the UK, while Brexit remains the primary driver of the pound, markets will keep a keen eye on this morning’s services PMI figure - especially with services comprising around 80% of the UK’s GDP. Expectations are for the index to ease slightly to 50.9, modestly above the 50.0 boundary between expansion and contraction. In addition to the headline reading, investors are likely to dig deeper into the report to gauge the impact of Brexit-related uncertainties on the industry. Regarding the UK’s divorce from the EU, a bill is due to be debated and voted on today mandating an extension of Article 50 to prevent a no deal exit, while the Prime Minister will face PMQs as well as possibly meet opposition leader Corbyn for Brexit talks to find a consensus on a way forward.
In the eurozone, focus will also be on PMI data, with markets looking for the services industry to continue its divergence from the manufacturing sector and maintain a strong rate of expansion. Expectations are for a services PMI reading of 52.7, unchanged from the flash estimate, alongside a composite PMI (all sectors) of 51.3. However, markets will keep an eye on the releases from individual euro-area member states, especially Germany, for any country-specific weaknesses. Retail sales will also be in focus, providing a broad gauge of both economic health and consumer sentiment. Expectations are for sales to have increased at 2.3% on a year-on-year basis in February.
Across the pond, the US focus will also be on PMI figures, with the ISM non-manufacturing PMI due this afternoon. Expectations are for a figure around the 58.0 level, a slight pullback from last month though still outpacing other major global economies. Also released will be ADP employment change data for March, expected at 170,000, ahead of Friday’s official labour market figures - though any correlation between the two is doubtful. A couple of Fed speakers are also scheduled, with Atlanta Fed President Bostic and dovish Minneapolis Fed President Kashkari both due to speak.
Today's Economic Calendar
|09:00||EUR||Final Services PMI (Mar)||52.7||52.7|
|09:00||EUR||Final Composite PMI (Mar)||51.3||51.3|
|09:30||GBP||Services PMI (Mar)||50.9||51.3|
|10:00||EUR||Retail Sales (y/y)||2.3%||2.2%|
|13:15||USD||ADP Employment Change||170k||183k|
|15:00||USD||ISM Non-Manufacturing PMI (Mar)||58.0||59.7|