Previous Day's Market Highlights
Sterling struggled on Tuesday as the pound was weighed down by a lack of any definitive Brexit breakthrough despite positive labour market data. Figures beat expectations, with wage growth (including bonuses) remaining near a post-crisis high at 3.4% on a 3-months-on-year basis and the unemployment rate falling to 3.9% - the lowest level since 1975. Further signs of a tight labour market were in evidence with a record high employment rate of 76.1% and the biggest rise in people in work, 220,000, since November 2015. Such positive data would usually spark a rally in the pound, and increase the chances of a Bank of England rate hike though Brexit continues to steal the headlines. There was little in the way of news regarding the UK’s divorce from the EU apart from reports from the EU that they will require a clear purpose for any delay to be agreed to. At the end of the London trading day, sterling was unchanged against both the euro and the dollar.
Elsewhere, the euro edged up by a further 0.2% against the greenback, before running into stiff resistance at the $1.1360 mark. The single currency was helped by upbeat German data, with economic sentiment figures reaching their highest level since April 2018, though still in pessimistic territory, as receding global geopolitical risk boosted future economic expectations. In contrast, the dollar nudged lower by around 0.1% as focus began to shift towards this evening’s Federal Reserve rate decision. Commodity currencies had a mixed day, with the Aussie dollar losing 0.2% but the Canadian and Kiwi dollars gaining by 0.15% - any decrease in global risk appetite could see the latter quickly reverse course.
Away from FX, European equities performed strongly again, with the pan-European Stoxx 600 adding 0.6%. In the US, markets pared early gains after Bloomberg reports over a lack of progress in trade talks between the US and China. The S&P 500 closed unchanged. Finally, crude prices were little changed, remaining near year-to-date highs, as OPEC-led supply cuts continued to tighten the market.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Today’s focus will lie with the Federal Reserve’s latest monetary policy announcement, due at 6pm. While no change to interest rates is expected, markets currently price a 99% chance of rates being kept on hold, focus will be on the FOMC’s latest economic projections and their monetary policy statement. The former is likely to show a further downgrade to growth expectations for the US economy, largely due to a tightening of financial conditions alongside a broader, global slowdown. The Fed are also likely to dial back their plan for rate increases this year, with the latest dot plot expected to show one 25bps hike in both 2019 and 2020, compared with the 2 2019 hikes forecast in December. Also of note will be any comments from Fed Chair Powell relating to the balance sheet run-off, expected to end this year, as well as reference to economic “cross-currents” including the ongoing US-China trade war. With markets expecting a cautious message from the Fed, a hawkish surprise would likely see the dollar well-supported.
Elsewhere, sterling traders will be focusing on this morning’s latest UK inflation figures, with expectations for CPI to have remained at 1.8% on a year-on-year basis in February. Of course, any Brexit-related news will also be a source of volatility in the pound. Other notable economic releases include this afternoon’s quarterly economic bulletin from the Swiss National Bank in addition to the overnight release of GDP figures from New Zealand. Consensus is for the New Zealand economy to have grown at 0.6% on a quarter-on-quarter basis in the final quarter of 2018, double the pace of Q3.
Finally, no central bank speakers are due to speak today, though tomorrow’s BoE and SNB meetings should give investors plenty of food for thought.
Today's Economic Calendar
|09:30||GBP||UK CPI (y/y)||1.8%||1.8%|
|18:00||USD||Federal Reserve Interest Rate Decision||2.25% - 2.5%||2.25% - 2.5%|
|18:00||USD||Federal Reserve Monetary Policy Statement|
|18:00||USD||FOMC Economic Projections|
|18:00||USD||Fed Chair Powell Press Conference|
|21:45||NZD||GDP (q/q - Q4 18)||0.6%||0.3%|