The single currency weakened against USD yesterday, but is on the offensive again this morning and continues to trade towards the upper bound of last month’s trading range. Both the April German ZEW Economic Sentiment Index and Eurozone February Construction figures contained pleasant surprises, inspiring hope for at least a bottoming out of the recent downturn in the Eurozone growth trend. The ZEW Current Situation Index fell to 5.5, but more importantly, the investor expectation index slipped into positive territory for the first time since March last year. The unusual cold January was followed by the exceptionally warm February, which combined favourable weather conditions with a bounce back that made Eurozone Construction output accelerate by 3.0% month on month in February. Today sees the Eurozone Current Account at 9:00 BST, which will be under extra scrutiny as trade tensions have recently somewhat flared up with the US. The Final CPI figure is due at 10:00.
Sterling drifted slightly lower yesterday, as G10 FX markets as a whole saw greatly reduced volatility. Labour market data was released, showing Average Weekly Earnings up 3.5% on a year on year basis, unemployment at 3.9%, and a net employment gain of 179,000 in the three months ended in February. The increase in wage growth to current levels has been anticipated by the Bank of England since at least 2017, due to the ongoing tightening of the labour market, and so is unlikely to provoke a monetary response. Consumer Price Index data will be released today at 09:30 BST.
The greenback has had a mixed 24 hours, making inroads against GBP, NZD while losing to NOK, SEK, AUD and CAD. Industrial Production figures for March were released, showing a surprise 0.1% contraction that did little to move the dollar. Reuters reported that White House economic advisor Larry Kudlow had said that the administration was talking to additional candidates for the Federal Reserve, after strong initial opposition to the nomination of Hermain Cain and Stephen Moore, who were widely viewed as political operators unqualified for monetary policy decision makers. MBA mortgage applications data will be released today at 12:00 BST, followed at 13:30 by Trade Balance data and Wholesale Inventories at 15:00. The Federal Reserve’s Beige Book, a periodic summary of anecdotal commentary on economic conditions, will be out at 19:00.
The loonie finally seemed to find its legs yesterday after Monday’s dismal Bank of Canada Business Outlook Survey, extending its gains this morning alongside most of the G10 after the release of solid Chinese Gross Domestic Product data. February Manufacturing sales were released yesterday and missed expectations to contract by 0.2%, to little market reaction. Today’s data is weightier and may produce a bigger impact: the Consumer Price Index is out at 13:30 BST, accompanied by Canada’s Trade Balance.