Euro/Dollar naturally taking the dovish Fed meeting in its stride yesterday, with the pair breaking topside resistance at the 50/100day around 1.1365 and continued on to break the downtrend resistance from March last year. With the Fed well and truly capitulating leading to a short-term USD sell-off, the market going forward may look to wait in a low vol. environment for further evidence of an improvement in Eurozone and Chinese data in order to see EUR/USD trend continuously higher. Tomorrow’s flash PMI data will be significant, while the day ahead is light in terms of domestic data – Brexit and the overhang from the dovish Fed will continue to drive price action.
Consumer Confidence @ 3:00pm
Sterling volatility is expected to continue with both the Prime Minister and the Leader of the Opposition in Brussels today, the PM for the Summit of the EU27 leaders and Corbyn meeting with Michel Barnier. Donald Tusk has indicated that a short, technical extension to Article 50, (to minimise any impact upon the upcoming European Parliament Elections), might be acceptable to the EU, contingent upon the agreement being passed by vote at Westminster. The unprecedented political uncertainty weighing on the Pound this morning ahead of the meeting of the Bank of England, with the Monetary Policy Committee expected to keep policy unchanged until political outcomes become clearer. Data releases this morning include Retail Sales, although their market impact is likely to be outweighed by Brexit related sentiment.
MPC @ 12:00
The Dollar is weaker following a far less optimistic Federal Reserve than had been expected by the market. Although no changes to interest rates were made, the Feds projections for future interest rates were lower and its forecasts for US growth were pared back. The update to balance sheet guidance is for the run off to begin in May and end in September providing market conditions develop in line with their expectations. With risk sentiment lower the Dollar weakened significant against the Yen, with the Euro trading higher out of its recent short term range. In terms of data releases today the Initial Jobless Claims will be watched closely, with the market continuing to keep an eye on any indication of developments in the China trade talks.
Philadelphia Fed @ 12:30
Initial Jobless Claims @ 12:30Tel: 1800 30 30 03 / +353 (0)1 790 0000
19 Mar 2019
The Euro continues to grind higher vs. the Dollar as the market looks ahead to the FOMC meeting tomorrow, with EUR/USD trading firmly back within the recent range. The levels to watch on the topside now are the 50 & 100 day moving averages around ~1.1365, and 1.1420 above here. Volatility remains supressed, with Euro/Dollar 3 month vol. hitting lows not seen since 2014. For the day ahead we watch the release of ZEW readings for Germany and Europe, although more focus naturally lying with release of PMI data on Friday.
ZEW Survey Expectations @ 10:00am.
John Bercow threw another spanner into the works yesterday after the speaker of the House of Commons ruled that PM May cannot bring back her deal for a third meaningful vote without making any substantial changes to the deal. It remains to be seen if the PM will attempt to find a way around this obstacle, or if it means the PM will go to the EU Council Summit on Thursday looking for a significant change in order to bring her Withdrawal Agreement for a third vote. For now though Sterling remains supported, with labour market data released this morning.
Unemployment @ 9:30am
The Dollar continues to trade on the back foot following a prolonged period of weaker than expected data releases. The markets attention has turned toward of the Federal Reserve meeting tomorrow, as the market awaits any follow through from dovish Fed commentary into the Fed’s growth/inflation and interest rate forecasts. We may also be provided with a concrete end date to balance sheet runoff, which may weigh on the Dollar if the end down of the unwind comes earlier vs. what is expected (which is around the end of Q3). For the day ahead it’s relatively light, with factory and durable goods in the afternoon.
Factory, Durable Orders @ 2:00pm.
13 Mar 2019
A good day for the single currency as Brexit headlines and a soft US Inflation print helped the Euro gain ground against most major currencies. ECB Chief Economist Peter Praet spoke about TLTRO’s, suggesting that “the side effects are outweighed by the positive effects on financing conditions for firms and households.” For today we get Spanish CPI and Eurozone Industrial Production while an positive developments in Westminster are likely to help the Euro perform.
EZ Industrial Production @ 10:00
Despite PM May’s Withdrawal Agreement once again being defeated in the House of Commons; Sterling has rallied back from its earlier lows as the UK PM confirmed that there would be a free vote for Tories for the week’s other votes on ‘No Deal’ and an extension to Article 50. An EU spokesperson has already confirmed that the EU would consider an extension – likely at next week’s EU Summit. From here, currency markets will focus this week on the UK parliament successfully passing an extension to Article 50 and if so, they will turn to next week’s EU Summit to see what form the extension will take
A weaker US CPI print – 1.5% YoY versus 1.6% expected – saw the Dollar come under pressure yesterday afternoon. Euro/Dollar traded back towards 1.13 while the Dollar Index has continued its recent fall. On trade, US Trade Representative Lighthizer suggested that although progress has been made in talks with China, that doesn’t mean a deal will get done. He also noted that both sides have spoken a lot about currency while confirming that China have requested an end to US tariffs under the discussions. Today we get US PPI, Durable Goods and Construction Spending.
US PPI @ 12:30, US Durable Goods @ 12:30 & Construction Spending @ 14:00
12 Mar 2019
A quiet start to the week for the Euro although events in Strasbourg did provide some impetus for the single currency to trade higher across the board. Euro/Dollar has gradually moved away from key support at 1.1170 and is seemingly back into a narrow trading range for now. With no major data of note today, the currency is likely to be driven by external factors. .
Reports of PM May travelling to Strasbourg began early yesterday afternoon and culminated in a press conference with EU’s Juncker yesterday evening. The most contensious aspect of last night’s announcement is the unilateral declaration by the UK. However with no change to the Withdrawal Agreement or a time limit on the backstop, market expectations for tonight’s Meaningful Vote to pass are still low. Sterling traded well following the headlines, making new highs against the Euro below 85p, but the focus for today will be on how much support the UK government has going into the vote at 7pm.
The main event in the US was yesterday’s Retail Sales which came in slightly better than expected although last month’s revisiions were lower across the board. The Dollar reached new highs against the Euro last week but remains on the back foot against a number of other major currencies. US President Trump unveiled a 2020 budget that includes $8.6bn for a border wall with Mexico while increasing defence spending and cutting domestic spending in an effort to curb the national debt. Today we seen US CPI.
US CPI @ 12:30
11 Mar 2019
A tough week for the single currency last week as the ECB exceeded market’s (dovish) expectations by reintroducing TLTRO’s and sharply revising down growth and inflation forecasts, particularly for 2019. Euro/Dollar finally broke out of its narrow range trading all the way down below 1.12 but has recovered half of the move following Friday’s weaker-than-expected payroll numbers in the US. Over the weekend CDU leader Annegret Kramp-Karrenbauer rejected most of the EMU integration proposals made by Macron, instead of the mind that Europe should maintain its political and national identities. For the day ahead it’s light in terms of domestic drivers, with the broader USD dynamics likely to dictate for now
It’s shaping up to be a volatile week for Sterling with Brexit deadlines likely to dominate price action. The House of Commons is set to vote on PM May’s revised Brexit deal tomorrow, although it is widely expected to fail. While the vote on no deal on Wednesday is also unlikely to pass, which leads to an ultimate likelihood of an Article 50 extension. Event risk remains however, with PM May apparently facing increasing pressure to resign, while also reportedly being urged by Conservative MPs to pull the meaningful vote tomorrow should she fail to garner further concessions from Brussels.
A strong week for the Dollar last week with the DXY testing the highs from November. This move was reversed somewhat after payrolls, while the Fed’s Powell was on the wires over the weekend stating that interest rates were “in an appropriate place”, buoying risk sentiment to kick off the week. For the day ahead we get release of retail sales, which will be watched closely given the previous print was the weakest since 2009. On the political front, President Trump is expected to reveal his proposed 2020 budget today or tomorrow, which could be interesting given the dynamics on Capitol Hill with a Democratic majority in the House.
Retail Sales @ 12:30pm