Morning Comment 10.05.21
Last week was a strong week for the EUR, making gains versus the Dollar, Yen and Pound. The latest polls from the weekend show Merkel’s bloc has fallen to an all-time low in the German succession race at around 23% currently. The Greens lead the way on 26%, close to their highest national support in about two years. EUR/USD pushed higher through 1.2150 on Friday, but has settled just below there this morning; a break of 1.2150 would open the door to the January highs at 1.2350, while 1.20 is expected to provide support.
Boris Johnson invited Scotland’s First Minister Nicola Sturgeon for crisis talks on the United Kingdom after she warned him of the danger of standing in the way of another Scottish Independence Referendum. The SNP fell one short of a majority in the Scottish Parliament elections over the weekend, however the result still leaves a pro-independence majority. There was very limited reaction in Sterling; EUR/GBP trades just below 87p as and still inside the well carved out 85/87p range. GBP/USD broke through 1.40 on Friday after the weaker than expected US employment report, and is now starting to eye up this year’s highs.
The USD was one of the worst performing currencies in G10 last week and slid after a weaker than expected April employment report (+266k vs 1 million expected), and there was also negative revisions to the March employment report. The data print has many market participants re-evaluating their outlook for the Fed, and the timelines around any reduction of emergency accommodation. This week, the key data prints are CPI for April expected at 3.6% YoY, and Retail Sales for April. The USD was on the back-foot post the poor payrolls number, and has seen some selling since versus G10.Tel: 1800 30 30 03 / +353 (0)1 790 0000
7 May 2021
Flash Currency Update
US Employment Data Update
The Dollar fell to its lowest levels in almost three months following the latest US employment figures released this afternoon. The recent run of strong economic data in the US was expected to continue with forecasts estimating that one million jobs would be added last month however the actual figures were only one quarter of the expected number, coming in at 266,000 for the period.
In recent weeks US Federal Reserve members have pushed back against the idea of reducing monetary stimulus given the uncertain outlook and today’s employment numbers certainly support that view. The Euro gained ground on the Dollar, rising to over 1.21, and almost back to the levels were it began the year.
Looking ahead; until the US economy can show meaningful progress towards the Federal Reserve’s goals, the supportive monetary policy currently in place coupled with the continued ambitious spending plans by US President Joe Biden are expected to put further pressure on the US currency.
Morning Comments 07.05.21
The German Health Ministry announced that the AZ vaccine will now be used adults of all ages, and that the gap between the first and second dose will be shortened. The vaccination campaign has picked up pace in recent week which has raised hope that the continent can bring the pandemic under control and reopen economies in time to save the summer season for those countries which are highly leveraged to tourism such as Spain, Italy and Greece. EUR/USD found support just below 1.20, and has bounced back to just below 1.21 which is near the top of the more recent range.
5 May 2021
Morning Comment 05.05.21
Spain’s conservative People’s party won a pivotal regional election in Madrid on Tuesday inflicting defeat on the country’s governing Socialists and prompting the resignation of the leader of the left-wing Podemos party. German finance minister Olaf Scholz wants to extend economic aid beyond pandemic to those who are in need, and whom the recovery has not yet been felt by which would see any cliff edge scenario in terms of ending supports avoided. EUR/USD is testing good support this morning just below 1.20. If it breaks, 1.1945 is the next level – that’s the 200dma and the low from Apr 19th.
Over £140bn worth of savings have been tucked away over the last year, and a further £100bn sits on corporate balance sheet. The savings are poised to supercharge the economic recovery this year said Rishi Sunak who notes that there are cautiously optimistic signs at present for the recovery, and he is hopefully that it will be sustained through the rest of the year. Ahead of the Bank of England meeting on Thursday which is the main event of the week, EUR/GBP trades just above 86p as and still inside the well carved out 85/87p range. GBP/USD continues in the 1.38/1.40 range.
Treasury Secretary Yellen spoke yesterday and emphasised that although Biden’s “America Jobs Plan”, and “America Families Plan” have large price tags of $2trn, and $1.8trn respectively, they are long term programme which are expected to boost trend growth, and improve the productivity of the American economy. The ADP employment report is the main piece of data today ahead of this week’s main event which is the April employment report on Friday. May is historically the strong month of the year for the Dollar which has made some headway to start the month vs G10.
3 Mar 2021
Morning Comment 03.03.2021
EUR/USD has traded in a 2% range between 1.1950 and 1.22 since the middle of January. The cross currently trades at 1.2095 having found support at the psychological 1.20 level yesterday morning. Above here, resistance is expected to be found at 1.2160, beyond which another test of 1.22 is likely. Elsewhere, Merkel revealed her plan to extend most of the country’s lockdown measures until March 28th while also allowing an easing of some restrictions, emphasising the need for a gradual reopening in the months ahead. It is quiet today on the data front, tomorrow will see the release of data on German factory orders for January.
The UK budget this afternoon is the week’s focal point for the pound; we will hear details on how Chancellor Sunak proposes to foot the bill for Covid-19, while simultaneously ensuring a strong recovery ensues over the course of 2021. Sterling has rebounded after a tough week last week where the pound came under pressure as equity markets wobbled on the back of rising US interest rates. EUR/GBP currently sits on support at 0.865; the next level below here is 0.85, while 0.875 is expected to provide resistance. GBP/USD found support close to 1.3850 yesterday, and has rebounded to now eye up the psychological 1.40 level ahead of the UK Budget.
The dollar gave up some of the gains made late last week as global investor risk sentiment recovered, and pace of change of interest rates in the US slowed. Elsewhere, Joe Biden’s $1.9trillion stimulus package passed the House; it now moves to the Senate to be voted on, but a turbulent couple of days are ahead as Biden looks to galvanise support for the deal to ensure it passes. This afternoon will see the release of the ADP employment report ahead of February employment report on Friday. There are more FOMC speakers on the wires today such as Bostic/Evans, while tomorrow Powell discusses the US economy ahead of the blackout period before the next meeting.
22 Feb 2021
Morning Comment 22.02.21
EUR/USD once again found support at 1.2050 last week before trading back above 1.21 later in the week. The cross has traded in a 2% range between 1.1950 and 1.22 over the last 5 weeks. A break of the topside of this range at 1.2160 would open the gateway towards the early January highs at 1.2350, while a break below 1.1950 would see some selling towards the 1.17 area. PPI along with the Manufacturing PMI for February was also stronger than expected in Germany on Friday, while the services PMI was marginally weaker owing to restrictions. This week will see the release of the IFO survey, along with Q4 GDP from Germany.
EUR/GBP remains under pressure, and sank below support at 87p in last week’s trading to its lowest level since March 2020. Optimism continues around the rollout of the Covid-19 vaccination in the UK; the next target for the UK government is another 17 million shots by the end of April. Chancellor Rishi Sunak look sets to extend the furlough scheme in the upcoming UK budget on March 3rd. GBP/USD set another cycle high this week moving above the psychological 1.40 level; it has traded back below the figure this morning on the back of equity weakness. Retail sales for January were very weak last Friday, but February PMIs for Manufacturing and Services beat expectations.
Last week, the USD showed bouts of strength before ultimately finishing weaker even as equity markets came under a small bit of pressure from rising US interest rates. The Fed Minutes from the January FOMC meeting stressed the importance of a “patiently accommodative” monetary policy. We are due to hear from Powell tomorrow when he delivers the semi-annual monetary policy report while Clarida and Brainard speak on Wednesday on the US economic outlook and the Fed’s maximum employment mandate. On Friday The US House will vote on the $1.9trn fiscal aid package which is expected to pass before moving to the Senate where it may see some opposition from the more conservative leaning democrats.