Morning Report: 22 April 2016

22nd April 2016 By: Ranko Berich

GBP Sterling is currently trading only slightly higher than yesterday’s open against EUR and USD, but the last 24 hours have been a wild ride, with GBP seeing massive strength around midday yesterday and during the European Central Bank Press conference. After the conclusion of the press conference sterling tanked, completing the wild ride that saw it gain and then lose 1% against USD in the space of six hours. Monthly Retail Sales data showed a 1.4% contraction in March, erasing much of the large spike seen in previous months, although year on year retail sales remain up 2.7%. No sterling data will be released today, although as yesterday’s events proved, developments elsewhere continue to have implications for sterling.

EUR The euro had a wild ride yesterday, at first strengthening broadly during the beginning on the European Central Bank’s Press Conference, before then falling rapidly and erasing all of its gains. The actual press conference seemed to mostly be about the ECB answering its recent critics, and contained little in the way of new information about the path of monetary policy. Interest rates remained unchanged, and ECB head Mario Draghi pushed back strongly against criticism of the ECB’s negative interest rate policy, saying that it was necessary to revive growth and inflation, and that over the last four years monetary policy has been the only thing propping up the eurozone’s economy. Draghi also said early on in his speech that interest rates would remain at present or lower levels for an extended period of time, walking back statements made during the last presser where he said further cuts were “not envisaged”. This morning has already seen the release of survey data for both manufacturing and services from France, Italy and the eurozone, with Markit’s Purchasing Managers’ Indices generally showing growing levels of output.

USD USD was also caught up in yesterday’s volatility, but has since stabilised against EUR and GBP, with NZD and JPY being the biggest losers against the greenback overnight. Yesterday’s biggest data release was weekly unemployment claims, which fell to their lowest level since 1973, as just 247,000 initial jobless claims were registered. This indicates a very tight labour market where employers are unwilling to dismiss staff for fear of being unable to replace them. The Philly Fed Manufacturing Index showed a contraction in output reported by the surveyed manufacturers, while the Conference Board’s Leading Index rose 0.2% month on month, indicating that the mix of forward looking economic indicators that comprise the index had grown by less than expected in March. Today at 14:45 BST, Markit will release its Flash Manufacturing Purchasing Managers Index, an output and confidence survey.

CAD CAD’s week long winning streak was finally broken yesterday, and the loonie weakened against USD, taking a step back from the 2016 highs seen on Wednesday. No data was released yesterday, but news of a potential political settlement in Libya’s civil war allowing a massive increase in crude oil output weighed down the Brent and WTI indices, removing some of CAD’s momentum. Today at 13:30 BST, the Consumer Price Index will be released alongside Retail Sales.

UK News

  • Reuters. Osborne misses target for UK deficit, downturn signals grow. Britain’s budget deficit has overshot Chancellor George Osborne’s target and retail sales fell sharply in March, adding to signs of a slowing economy, according to data released on Thursday.
  • The Guardian. UK retail sales drop as shoppers cut back on food and clothes. The Office for National Statistics (ONS) said retail sales volumes decreased 1.3% last month, a much sharper drop than the 0.1% dip forecast by economists in a Reuters poll. Sales were up 2.7% on the year, well below forecasts for 4.4% growth.