8th April 2019 Market Update
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🇬🇧 GBP – After Theresa May opened up Brexit negotiations last week, the Pound fell as hopes diminished of an agreement being reached which was confirmed on Saturday. Market direction was dictated by the Prime Minister’s application for a further extension of Article 50 until June 30th which would avoid the need to take part in European Elections by the virtue of the European Parliament not sitting until the day afterwards. Tusk replied with an offer of a 1 year ‘flextension’ which could be brought forward if the UK ratifies a deal. It seems that the market may be beginning to tire of extension talk and Sterling strength will depend on whether a timeframe can be agreed to which is a departure from market reaction a couple of months ago.
This week is quiet on the data front for the UK. On Wednesday, trade balance data, industrial and manufacturing figures will be released and are expected to show a negative picture for the economy. This could be compounded by NIESR GDP figures for the quarter which are expected to be flat at 0.0%, down from 0.1%. If this transpires or possibly dips into negative territory, the Pound could fall significantly after poor PMI results last week.
🇪🇺 EUR – The Euro was largely in a consolidation phase last week and a stream of soft economic data backed up the ECBs recent cautious tone. Manufacturing PMIs were well below 50 for Italy, Germany and France with the collected figures publishing at 47.5. Services PMI data was better however and improved on expectations.
Wednesday will be the crucial day for two reasons. The ECB will release its interest rate decision at 12:45 although no change is expected and so the press conference at 13:30 will be the focus. Markets will pay particular attention to the wording that Draghi uses to determine whether further stimulus will be needed. Additionally, the EU will hold an emergency summit on Brexit as the new deadline approaches very quickly. German CPI will be watched on Thursday which is due to come in line with the previous reading and Eurozone Industrial Production is due to drop significantly for February.
🇺🇸 USD – The US Dollar fell slightly at the end of last week after a surprising jobs report. Non-farm payrolls rose by 196,000 and the result for February was also revised upwards but those gains were still the smallest since September 2017. Wage gains slowed in March and overall employment levels dropped and it was this disappointment that traders reacted to. Despite the data backing up the Fed’s softer stance at their last meeting, the US Dollar index remained relatively strong at just over 97.
Inflation data will be released at 13:30 on Wednesday and is expected to edge up from 0.2% to 0.3%. FOMC minutes will be published on Wednesday evening which will provide further insight into the thought of the Fed officials when taking the chance of a rate hike in 2019 off the table. Trump also announced that a trade deal is expected with China in the next 4 weeks and so any further reports on that relationship will create volatility.
GBP: Theresa and Jeremy set to resume talks to avoid no deal
EUR: ECB in Focus on Wednesday
USD: Inflation and Fed Minutes focus this week
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