Pausing for Breath

Major currencies struggle for direction on Friday ahead of another key week for Brexit negotiations as well as the upcoming Federal Reserve meeting.

Previous Day's Market Highlights

Markets took a pause for breath on Friday, as a lack of news headlines combined with a mixed data picture to leave investors cautious heading into the weekend. The pound held steady, edging up by around 0.2% against the dollar and trading flat against the euro, as a lack of concrete Brexit-related news left investors with little food for thought. Despite reports that the DUP were meeting the Government for negotiations in London, there was no confirmation of backing for the Withdrawal Agreement - which may come back to the Commons for a third meaningful vote this week. Over the weekend, the Prime Minister has appealed to MPs to agree to an “honourable compromise” and back her deal, though the chances of it passing remain in the hands of the DUP and Conservative eurosceptics.
Elsewhere, the dollar edged lower, heading for its biggest weekly fall this year, as a mixed set of economic data weighed on the greenback. Despite consumer sentiment figures reaching a 3-month high and job openings data remaining near to a record-high, weaker than expected industrial production numbers tempered any optimism. Over the day, the dollar traded weaker by 0.25%, with the greenback heading for a fall of 0.75% over the course of the week. Meanwhile, in a similar way to the pound, the euro traded unchanged as final CPI figures showed inflation in February increasing at 1.5% on a year-on-year basis, with the less-volatile core measure also increasing at an as-forecast 1%. The euro struggled to break out of its tight $1.13-$1.1330 trading range for the third straight session.
Away from FX, both European and US equity markets gained, with technology stocks leading the way. The pan-European Stoxx 600 gained 0.75%, closing the week at its highest level since early-October 2018. Meanwhile, the S&P 500 added 0.5% on Friday, chalking up its biggest weekly gain since November 2018. Finally, in commodities markets, oil prices fell after a surge in US production. Global benchmark brent lost 0.3%, edging below $67bbl.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1720 1.1803 1.1411 3.32%
GBP/USD 1.3295 1.3381 1.2895 3.63%
EUR/USD 1.1345 1.1419 1.1176 2.13%
GBP/AUD 1.8680 1.8851 1.8085 4.06%
GBP/NZD 1.9358 1.9542 1.8833 3.63%
GBP/CAD 1.7695 1.7795 1.7091 3.96%

Today's Market Highlights

The week begins with a quiet economic calendar, though things do get busier as the week progresses. Today’s only notable data point is trade balance figures from the eurozone, expected to show the trade surplus narrowing to 13.2bln EUR, a level which would be the narrowest surplus since October 2018. Meanwhile, the pound will remain sensitive to any Brexit news-flow, including any MPs indicating that they are switching sides to back the Prime Minister’s deal at a potential 3rd meaningful vote this week. Overnight, focus will shift to the antipodeans with minutes from the Reserve Bank of Australia’s latest monetary policy meeting set to be released alongside consumer sentiment figures from New Zealand. The former will likely attract significant attention, with the odds of an RBA rate cut this year continuing to mount. Monday’s North American data calendar contains no significant releases. 
Looking ahead to the remainder of the week the main focus, barring Brexit, will be a plethora of central bank meetings. Most importantly, the Federal Reserve will announce their latest monetary policy decision on Wednesday, with no change to rates expected. However, attention will be on the Fed’s latest set of economic projections, including the ‘dot plot’ indicating individual Fed members’ expectations of interest rates over the coming years. Other likely areas of focus include references to the Fed’s balance sheet run-off, as well as a potential cautious tone from Fed Chair Powell at the post-meeting press conference. Any dovish surprises would likely result in significant weakness in the dollar though the Fed will want to avoid spooking markets again after their dovish pivot in January. The Bank of England and Swiss National Bank also meet, both on Thursday, though neither is expected to announce any policy changes. Focus for the former will be the ongoing Brexit situation, while the latter is likely to focus on the valuation of the franc.

In terms of economic data, the calendar is busy. From the UK, investors will be focusing on the latest labour market report along with CPI inflation and retail sales figures. Expectations are for wage growth to remain near a post-crisis high, while inflation is set to remain flat at 1.8% on a year-on-year basis. Elsewhere, other focuses include labour market figures from Australia as well as flash PMI surveys from the eurozone and GDP figures from New Zealand for the final quarter of 2018.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Trade Balance 13.2bln 15.6bln
20:00 NZD Westpac Consumer Sentiment 109.1