Previous Day's Market Highlights
Sterling extended its recent declines on Thursday, reaching fresh 3-month lows against the dollar and euro, as political uncertainties and a risk averse market continued to weigh on the pound. Once again, little progress was made in the cross-party Brexit talks, with the discussions still likely to collapse in the coming days, though the Labour Party reportedly moving closer to backing a 2nd referendum does seem at odds with the Conservatives position, further lessening the chances of a deal being made. Political news did however come from the Conservative Party, with the backbench 1922 Committee announcing that the Prime Minister will hold a further meeting with them after a vote on the Withdrawal Agreement in the first week of June. While this decision allows PM May to cling onto power for another few weeks, the announcement makes a Conservative Party leadership challenge a dead certainty. The uncertainty that this will cause, combined with the potential for a hardline Brexiteer Prime Minister advocating a ‘no-deal’ exit will likely prove headwinds for the pound in the months to come. This political uncertainty is already beginning to exert downward pressure, with the pound losing 0.3% across the board on Thursday. Sterling has now recorded 9 consecutive daily declines against the euro, the pound’s worst run since December 2000.
Elsewhere, a relatively resilient slate of US data helped to underpin the greenback, which gained 0.25% against a basket of peers, reaching close to a 2-week high. Both housing starts and building permits increased at their fastest pace since January last month, at 1.235mln and 1.296mln respectively. This, combined with weekly jobless claims reaching a 1-month low and the Philadelphia Fed manufacturing index reaching a 4-month high, tempered some fears of a weak start to the 2nd quarter in the US after a disappointing retail sales release yesterday. In Europe, the single currency dipped modestly by around 0.2%, mainly due to dollar strength, with markets largely ignoring trade balance data. Turning to commodity currencies, the Aussie dollar continued to weaken, losing 0.3%, after a mixed labour market report increased the chances of an imminent RBA rate cut. Meanwhile, firming oil prices helped the Canadian dollar to find some support, with the loonie closing unchanged over the day.
In other markets, equities rallied in both Europe and the US, with markets buoyed by strong earnings and upbeat economic data. The pan-European Stoxx 600 recorded a gain of 1.2%, while the US benchmark S&P 500 chalked up a 0.9% gain. Finally, oil prices continued to firm as increasing tensions in the Middle East heightened supply concerns. Both Brent and WTI rallied almost 2% over the course of the day.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
The week concludes with a quiet economic calendar, with the main release being this afternoon’s preliminary consumer confidence figures from the University of Michigan for the month of May. This is the earliest released, and most widely watched, gauge of consumer sentiment, with the index expected to increase to 97.5, reversing last month’s unexpected decline. An uptick in confidence would likely see the dollar find some support, with increased consumer confidence likely to result in increased consumer spending, thus boosting economic growth. Markets will also look to the report for reassurance of the health of the US consumer after a disappointing April retail sales report.
Elsewhere, UK economic data is once again lacking, with focus likely to remain on developments in Westminster - including the potential collapse of bipartisan Brexit talks. In the eurozone, markets will focus on this morning’s release of final CPI figures for April, though the data is unlikely to differ from the flash estimate, showing headline inflation at 1.7% on a year-on-year basis, with core inflation at 1.2%. Markets will also be looking for confirmation of the previously reported plan for President Trump to delay the imposition of tariffs on auto imports for 6 months - with a decision due by tomorrow. Central bank speakers will also be in focus, with the Fed’s Williams and Vice Chair Clarida due to speak. Any comments on the monetary policy outlook are likely to attract significant attention. Over the weekend, Australia will head to the ballot box in Federal Elections, with opinion polling currently suggesting the country will elect their 7th different Prime Minister in 12 years.
Looking ahead to next week, economic data is once again relatively thin on the ground. The main economic release is likely to be Thursday’s eurozone flash PMI surveys, with markets continuing to attempt to gauge the extent of an economic slowdown in the bloc. Other notable data releases include CPI inflation and retail sales from the UK along with durable goods orders from the US. On the central bank front, markets will chew over minutes from both the RBA’s and Fed’s latest monetary policy meetings. For the former, focus will be on any dovish comments teeing up a rate cut later in the year amid sluggish inflation and upward trending unemployment. For the Fed, markets will continue to look for a consistent message of patience in determining future policy shifts, along with emphasis of benign inflation being due to temporary factors. Finally, European voters will head to the polls in elections to the European Parliament during the latter part of the week. Here in the UK, the elections are likely to be a drubbing for both major political parties, with voters likely to treat the poll as a proxy 2nd referendum.
Today's Economic Calendar
|10:00am||EUR||Final CPI (y/y - Apr)||1.7%||1.7%|
|10:00am||EUR||Final Core CPI (y/y - Apr)||1.2%||1.2%|
|3:00pm||USD||Prelim. University of Michigan Consumer Sentiment Index||97.5||97.2|