Previous Day's Market Highlights
FX markets remained within familiar ranges to begin the week, with disappointing economic data from both the US and eurozone doing little to stimulate volatility. From the US, spending and consumption data was the main point, with figures continuing to show subdued inflation as the core PCE price index (the Fed’s preferred inflation measure) increased at just 1.6% y/y in March. Such benign inflation reinforces the theory of a ‘goldilocks’ economy - one where growth is solid and inflation muted. Other highlights of the report included personal spending increasing at 0.9% on a month-on-month basis, the fastest rate since 2009, however personal income increased at 0.1%. The dollar largely shrugged off the release, falling 0.2% over the course of the day, but remaining close to 2 year highs against a basket of peers.
Elsewhere, the dollar weakness benefitted the euro, which added 0.3% despite poor economic confidence figures confirming the relatively bleak outlook. Economic sentiment fell for the 10th consecutive month, by 1.6 index points to 104.0, reaching its lowest level since September 2016. Business confidence also fell, hitting its lowest level since August 2016. Despite the poor figures, the data provides little in the way of fresh information, merely serving to confirm markets’ view of continued soft economic activity in the euro area. For the pound, a lack of Brexit-related news left sterling treading water within a familiar range. Reports state that Brexit has been taken off the Cabinet agenda this week, with focus shifting to Thursday’s local elections, hence economic data in the latter part of the week is now of greater importance. Overnight, the Australian dollar has lost around 0.2% after disappointing data from China. Both official and private (Caixin) PMI surveys, the more important latter release showing the PMI falling further to 50.2, just above the key 50.0 boundary between expansion and contraction.
Away from FX, equity markets on both sides of the Atlantic recorded gains. The pan-European Stoxx 600 added just less than 0.1%, while the US benchmark S&P 500 added 0.11%, recording a fresh record closing high. Finally, oil prices remained pressured, with President Trump’s urges for price cuts weighing on prices. Benchmark Brent fell 0.15%, while US WTI crude fell by 0.4%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Eurozone economic data will be markets’ main focus today, with this morning’s preliminary flash estimate of 1st quarter GDP likely to steal the most attention. The growth figures are the first chance for markets to assess the extent of the euro area’s slowdown at the beginning of the year, with expectations for growth of 1.1% on a year-on-year basis and of 0.3% on a quarter-on-quarter basis, the latter being a very modest uptick compared to the final quarter of last year. With a degree of pessimism seemingly priced into markets, through heavy short positioning in addition to rather pessimistic forecasts, risks appear biased to the upside for the euro should the GDP numbers bring about a positive surprise. Also in the eurozone, data is likely to show the unemployment rate holding steady at 7.8% this month, while inflation numbers from Germany should also pique some interest. Expectations are for prices in the eurozone’s largest economy to have increased at 1.7% on a year-on-year basis in April, a healthy increase from March’s 1.4% and a mildly positive sign for the ECB and their struggles with benign inflation.
Elsewhere, the UK’s economic calendar is bare and, with Brexit seemingly on the back-burner ahead of Thursday’s local elections, the pound is likely to tread water within its now familiar trading ranges. Across the pond, the calendar is busier, with notable releases due from both the US and Canada. From the US, markets will digest March’s pending home sales figures alongside April’s consumer confidence figures. The former is expected to show an increase of 0.5% on a month-on-month basis, bouncing back from last month’s 1% decline, with the latter likely to show an increase in consumer confidence to an index level of 126.5. From Canada, focus lies with monthly GDP for February, expected to show growth of 0.1%, broadly in line with the BoC’s assessment of the Canadian economy beginning the year in lacklustre fashion.
Overnight, attention will turn to the quarterly labour market report from New Zealand. Markets will be looking for the jobs market to remain robust, with expectations for the unemployment rate to decrease to 4.2%, and for employment to increase by 0.5% compared to the final quarter of last year. The labour cost index, or wage increases, will also be eyed for any monetary policy implications, with an modest uptick expected to 2.1% on a year-on-year basis. It should be noted that the risks to the kiwi dollar appear biased to the downside, especially after an aggressive market reaction to 1st quarter inflation numbers, as investors continue to try to second-guess the RBNZ’s next policy move.
Finally, a couple of central bank speakers are due throughout the day to give markets food for thought. BoE Deputy Governor Ramsden, a possible successor to Governor Carney, is due to speak this morning, however the speech is unlikely to touch on monetary policy ahead of Thursday’s BoE announcement. Of more interest will be this afternoon’s testimony from BoC Governor Poloz and Senior Deputy Governor Wilkins to the Parliamentary Standing Committee on Finance. Any comments relating to the monetary outlook will be of particular interest to markets after the BoC shed their tightening bias last week.
Today's Economic Calendar
|10:00am||EUR||GDP (y/y - Prelim. Flash Q1)||1.1%||1.1%|
|10:00am||EUR||GDP (q/q - Prelim. Flash Q1)||0.3%||0.2%|
|10:00am||EUR||Unemployment Rate (March)||7.8%||7.8%|
|1:00pm||EUR||German HICP (y/y - April)||1.7%||1.4%|
|1:30pm||CAD||GDP (m/m - Feb)||0.1%||0.3%|
|3:00pm||USD||Pending Home Sales (m/m - March)||0.5%||-1.0%|
|11:45pm||NZD||Unemployment Rate (Q1)||4.2%||4.3%|
|11:45pm||NZD||Employment Change (Q1)||0.5%||0.1%|