Quiet before the storm

4 May, 2017

Paul Newfield

Yesterday, despite all that is going on with Brexit and two major election campaigns, the Pound remained relatively strong against both the Euro and the USD, with only half a cent movements, in part due to investors waiting to see what happens with the French election this weekend and also due to a lack of eco stats released, particularly from the UK.

The only data of the day came from the USA and the Euro-zone and it perhaps should have had more impact than it did – lack of movement perhaps can be put down to investor sentiment. At 8am was the non-monetary policy’s ECB meeting, shortly followed by unemployment figures from Germany, which although coming in positive light, did little to strengthen the Euro. Later in the day, there was a mixed bag of results with PMI construction in the UK coming in positively, as predicted GDP from the eurozone, although Euro inflation figures did come in below the expected and previous figures.

It was good news from across the pond with inflation, manufacturing and employment all coming in above the expected numbers but again very little movement in the currency markets. The biggest news of the day came in the evening when the FED had their monetary policy meeting and interest rate decision, which was held at 1%, which did actually cause the first significant movement of the day with GBP-USD dropping half-a-cent – Janet Yellen, “head of the Fed” stating that economic activity will expand, labor-market conditions will strengthen and inflation will stabilise, long term, around 2% – all US positive, of course.

Today sees a significant increase in data releases world-wide – already we have seen a mixture of positive and negative markit services data from numerous eurozone countries, including the UK which came in above expectations, prompting an initial improvement in GBP-EUR. Consumer credit was also up, but this was not mirrored by mortgage applications which is slightly down on the previous figure.

Later this morning we have retail sales from Europe, a host of key stats from the US, including trade balance and jobs data, with Factory orders later this afternoon. To round the day off we have the big Mario Draghi speech – which may contain sentiments regarding his opinion that the Eurozone recovery has been “solid and broad”. While there was little movement in the exchange rates yesterday, we have already seen some volatility today so do stay in touch with your CI account manager.