Morning Report: 25 April 2016

25th April 2016 By: Ranko Berich

GBP Despite a midweek wobble, last week was a good one for sterling, which managed to strengthen against both USD and EUR. Although this week’s data calendar begins today at 11:00 BST with the release of CBI Industrial Order Expectations, the week’s most important release will not be until Wednesday’s Preliminary Gross Domestic Product Growth reading for the first quarter of 2016. Several other data points indicate that the economy probably slowed in Q1, so expectations for Wednesday are low and most forecasters expect growth to have slowed from 2015. Later in the week, Bank of England Money and Credit statistics will be released on Friday.

EUR The euro opens this week slightly weaker than it did the last, after a sharp fall on Friday. Reports emerged on Friday that eurozone finance ministers were edging closer in negotiating the next stage of Greece’s debt bailout. The terms reportedly being imposed on Greece for the latest round of bailout funding remain completely outside the realm of sensible economic policy, and are extremely unlikely to be achievable. Greece’s 2018 fiscal target for a 3.5% primary surplus is little more than a pipe dream at the moment, and would only be remotely achievable in the event of a sudden explosion of economic growth. This morning has already seen the release of the IFO German Business Climate Survey, which showed a slightly lower level of output among the surveyed businesses. Later in the week, German and Spanish Inflation and Unemployment statistics will be released on Thursday, followed on Friday by Gross Domestic Product Growth figures for France and Spain.

USD USD is up against almost the entire G10 this morning, most notably the Japanese Yen, which is finally relinquishing some of its gains from March. This will be an important week for USD, with several headline data releases scheduled and a monetary policy announcement from the Federal Reserve. Durable Goods Orders data will be released today at 13:30 BST, followed at 14:00 by the Case-Shiller House Price Index. At 14:45 the survey based Services Purchasing Managers Index will be released by Markit, and at 15:00 CB Consumer Confidence will be released alongside another survey index, the Richmond Manufacturing Index. Later in the week the Fed’s latest rate announcement is due on Wednesday evening, followed on Thursday by the first reading of Gross Domestic Product growth in Q1 2016.

CAD Friday’s price action on the loonie was, for once, not determined by movements in crude oil prices, as CAD strengthened after the release of very strong monthly inflation and retail sales data. The Consumer Price index rose 0.6% in March, while Core Retail Sales rose 0.7%. Food price increases were a major factor in the improvement in inflation, with Gasoline still acting as a year on year drag on inflation. The Bank of Canada’s Stephen Poloz will speak at a securities summit tomorrow, and this Friday monthly Gross Domestic Product Growth data will be released alongside price indices for Raw Materials and Industrial Products.

UK News

  • The Guardian . UK GDP figures expected to be weaker amid EU vote fears. The pressures on the UK economy from EU referendum jitters and a downturn in global trade will be revealed this week with the publication on Wednesday of official UK growth figures.
  • Reuters. Bank of England’s Vlieghe says UK rates could “theoretically” go below zero. The Bank of England could reduce interest rates below zero in theory, although they should go nowhere near levels that would encourage big companies to stockpile cash, one of the central bank’s rate setters said in an interview published on Friday.
  • Bloomberg. Living Wage Compounds Problems for Ailing U.K. The new National Living Wage is increasing costs and adding to concerns about the outlook. More than 20,000 retailers ended the first quarter in a “dire financial state,” according to U.K. advisory firm Begbies Traynor.