Previous Day's Market Highlights
The dollar declined for the first day in four on Friday, losing a modest 0.15%, as markets digested the 1st quarter GDP report. Data showed the US economy grew at 3.2% on an annualised, quarter-on-quarter basis in the first 3 months of 2019, beating expectations of 2.3% growth. However, the details of the report were less optimistic, showing growth being driven by a combination of rising exports, falling imports and higher inventories - all typically volatile factors which may prove to be temporary. Furthermore, underlying demand in the US economy appears relatively weak, especially business investment and consumer spending, the latter increasing at just 1.2% in the first quarter compared to 2.5% at the end of 2018. It was this weak demand, along with the possibility of a dent to 2nd quarter GDP from higher inventories that weighed on the greenback, though the dollar remains close to its highest levels in almost 2 years.
Elsewhere, moves were relatively muted with no economic releases from either the UK or the eurozone. The pound continued to meander, though did manage to take advantage of the broad dollar weakness, adding 0.1% against the greenback as sterling recorded its 1st gain in the last 9 trading days. Against the euro, sterling fell by a shade under 0.1%. The single currency was also a beneficiary of the broad dollar weakness, bouncing back from near 2-year lows. Meanwhile, the kiwi dollar was the best performing major on Friday, adding 0.5% after comments from RBNZ Governor Orr that the economy is in a “pretty good spot”, dampening some expectations of a rate cut at the RBNZ’s May policy meeting.
Away from FX, equity markets gained after the better than expected US GDP data. The pan-European Stoxx 600 added 0.22%, while the US benchmark S&P 500 added 0.5% to close at a fresh record high. Finally, oil prices slid on Friday after reports President Trump had asked OPEC to temper prices. Over the day, WTI fell by 2.9% and Brent fell by 3%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
Economic data from the US remains in focus today, with markets’ primary focus set to be this afternoon’s core PCE figures - the Fed’s preferred inflation gauge. Expectations are for prices to have increased at 1.7% on a year-on-year basis in March, a slight decline from the previous figure of 1.8%. Data for March will be released alongside February’s figures, which were previously delayed by the US government shutdown. The data is unlikely to have an impact on Wednesday’s Federal Reserve policy decision, though may alter the markets’ current view of future policy action, with a rate cut by the end of 2019 a 64% chance at present.
Elsewhere, data is relatively limited, with the UK’s data calendar once again sparsely populated. From the eurozone, focus will fall on consumer confidence and business climate figures, with investors continuing to look for signs of economic data bottoming out. Consumer confidence is expected to remain at -7.9, a 3-month low, while business climate figures are expected to fall to their lowest level since mid-2016. Central bank speakers are also lacking, though BoE Governor Carney is due to make an address this morning. Any comments on monetary policy will be closely scrutinised ahead of the BoE’s policy decision on Thursday.
The remainder of the week is busy, with both central bank meetings and economic data coming to the fore. Both the Federal Reserve (Weds) and Bank of England (Thurs) will announce their latest monetary policy decisions, with neither expected to alter rates. For the Fed, focus will fall on comments around the health of the US economy in addition to the policy outlook. Meanwhile, for the BoE, markets will be closely watching the latest set of economic forecasts contained in the quarterly Inflation Report, as well as being on alert for a possible modest hawkish tilt in light of the tight UK labour market. Governor Carney will be addressing markets in a press conference half an hour after Thursday’s policy decision is announced. The data calendar is also busy, with the usual monthly set of PMI surveys alongside GDP from Canada and the eurozone likely to either confirm the theory of a global economic slowdown, or show the early signs of green shoots emerging. Finally, not to be forgotten is the monthly US labour market report (Friday) where focus will likely fall on both average hourly earnings and the unemployment rate, as markets look for signs of a continued tight market. In addition, headline nonfarm payrolls will attract attention, with expectations for a print broadly in line with the 3-month average of 180k.
Today's Economic Calendar
|9:10am||GBP||BoE Gov. Carney Speech|
|1:30pm||USD||Core PCE Price Index (y/y - March)||1.7%|