Green Shoots in the Eurozone?

Markets were steady on Wednesday despite a busy calendar ahead of this morning’s key eurozone PMI figures.

Previous Day's Market Highlights

Markets remained confined to familiar trading ranges on Wednesday despite a busy economic calendar, with inflation figures the primary focus. From the UK, CPI inflation remained at 1.9% (y/y) for a 2nd consecutive month in March, the 3rd straight month under the BoE's 2% target. Despite inflation tracking modestly below target, CPI can be expected to tick up throughout the year in line with an increase in energy prices. For the pound however, the release was a non-event, with sterling having one if its quietest daily trading ranges against the dollar in 2 years, and closing lower by just 0.1%. Inflation figures from the eurozone also failed to ignite much volatility with the data serving merely to confirm the sluggish readings seen in the previous flash estimates, with CPI at 1.4%, and core CPI at 0.8%. The single currency did modestly gain over the day, adding around 0.2%. 

The Canadian dollar was a bigger beneficiary of economic data, with core inflation increasing at an above-forecast 1.6% on a year-on-year basis. An uptick in inflation leaves further monetary policy tightening from the BoC on the table, with the loonie adding 0.3% as a result. Meanwhile, the greenback largely trod water, with little in the way of significant economic data to move the dollar. Overnight, the Aussie dollar has held firm after an as-forecast labour market report. The Australian economy added 25.7k jobs last month, while the unemployment rate modestly increase to 5%. The modest uptick in unemployment is unlikely to immediately change the RBA's policy stance, though a continued upward trend may result in a rate cut later in the year. 

In other markets, equities had a mixed day on both sides of the Atlantic. In Europe, the Stoxx 600 closed unchanged in a quiet day of trading. Meanwhile, in the US, the benchmark S&P 500 lost 0.25% as losses in healthcare stocks overshadowed strong Chinese growth figures. Finally, oil prices held relatively firm, despite an increase in US stockpiles, with both Brent and WTI adding around 0.2% over the day.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1545 1.1787 1.1519 2.27%
GBP/USD 1.3045 1.3269 1.2976 2.21%
EUR/USD 1.1300 1.1391 1.1183 1.83%
GBP/AUD 1.8151 1.8731 1.8093 3.41%
GBP/NZD 1.9400 1.9562 1.9049 2.62%
GBP/CAD 1.7418 1.7795 1.7314 2.70%

Today's Market Highlights

Today's primary focus will be the latest set of flash eurozone PMI figures, giving markets a good insight into the performance of the euro-area economy in the early part of Q2. After disappointing last month, expectations are for a modest recovery in the manufacturing sector, with survey data showing some modest early signs of recovery. Expectations are for the eurozone manufacturing PMI to recover to 47.9, still in contractionary territory, while Germany's figure (Europe's largest economy) is expected at 45.0, slightly above the multi-year lows seen last month. Meanwhile, markets will be looking for continued resilient performance from the services sector, with expectations of 53.2 for the services PMI, broadly similar to last month. A modest rebound in the PMI figures would likely see the single currency well-supported, though a data miss would likely see EUR/USD fall back into its year-to-date downtrend channel. 

Elsewhere, retail sales figures are the order of the day, with numbers due from the UK, US and Canada. Of most interest is likely to be the US figure, with expectations for an increase of 0.9% on a month-on-month basis. Though the dataset has proved volatile in recent months, an increase in sales in the consumer-driven US economy would be a positive and is likely to underpin the greenback. The UK figure is unlikely to be a significant market-mover, with focus beginning to shift back to Westminster and Parliament's return next Tuesday. From Canada, expectations are for a 0.4% increase in sales, though figures are for February, therefore slightly out of date. Also due today is the weekly US jobless claims figure, expected to hold near the 5-decade lows seen last week. 

Other notable events today include a speech from Fed member Bostic alongside the possible release of a redacted version of special counsel Mueller's report into possible interference in the 2016 US election. Over the bank holiday weekend, with UK, European & Asian markets closed, liquidity is likely to be severely reduced. A couple of data releases are due however, with US building permits and housing starts due on Friday, and US home sales numbers due on Monday.

Please note that the Morning Report will not be published on Friday 19 April or Monday 22 April due to the Easter break. Publication will resume as normal from Tuesday 23 April.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:00am EUR Prelim. Manufacturing PMI (Apr) 47.9 47.5
9:00am EUR Prelim. Services PMI (Apr) 53.2 53.3
9:00am EUR Prelim. Composite PMI (Apr) 51.8 51.6
9:30am GBP Retail Sales (m/m - March) -0.3% 0.4%
1:30pm USD Retail Sales (m/m - March) 0.9% -0.2%
1:30pm CAD Retail Sales (m/m - March) 0.4% -0.3%