The Pound is trading within a range verus the US Dollar following the first round of the French elections which helped the Euro hit a 2-week high.
The Pound began the week on the back foot having lost some ground against the US Dollar yesterday. The decline confirmed the US Dollar’s current consolidation trend which began after last week’s strong surge from the Pound. The GBP/USD pair remains range bound and no significant developments are expected to occur today.
Technical indicators suggest that the Pounds recent bullish moves are likely to prevail at some point but with resistance from the US Dollar not far from the current level the Pound may struggle to hold onto any long term favourable gains.
Altogether the outlook for the UK economy does not appear overly encouraging particularly as both the uncertainty of the general election and Brexit negotiations continue to weigh on the minds of investors.
The Euro was steady throughout the day yesterday after maintaining gains following the French presidential vote which has led to a run-off between Emmanuel Macron and Marine Le Pen. Following Macron’s first round victory, Asian equities advanced as risk appetite rose lifting several regional markets to multi year highs.
The latest polls suggest Emmanuel Macron will defeat Marine Le Pen by as much as 30% in the second round of the French presidential election in two weeks. This has lifted the Euro mainly because Mr. Macron wants France to keep the euro and remain in the EU so his policies will contribute to Europe’s ongoing political stability.
Data from the Ifo yesterday reported that German Business Climate improved unexpectedly in April with the index surging to 112.9 versus expectation of no change. The release hit a new high, overshooting the previous month’s record. Positive sentiment was registered in all four major sectors but mainly in the retail sector where the index reached its highest level since September 2015.
So far this month, the US Dollar has fallen from its highs seen in January 2017 and it remains down so far for the week. The main contributing factors were last week’s weak retail sales and inflation data.
The US dollar and crude oil are usually inversely related so a fall in the US dollar makes crude oil more economical for oil importers so, when the dollar falls, crude oil prices should rise. However, this trend has not been the case this week as both indexes are down.
Market surveys predict interest rate hikes for the US in June 2017 and September 2017 so the dollar should gain ground off the back of these events should the FED follow through.
3.00 pm – US consumer confidence (April), new home sales (March): home sales forecast to fall MoM
10.00 am – Eurozone business climate (April): forecast to hold at 0.82
12.45 pm – ECB rate decision (press conference at 1.30pm): no changes in policy expected. Commentary around the outlook for quantitative easing will be the main focus
1.00 pm – German inflation (April, preliminary): expected to rise to 1.9% from 1.6%
1.30 pm – US durable goods orders (April), Initial jobless claims (w/e 22 April): durable goods orders expected to rise 0.4% MoM from 0.5% a month earlier. Jobless claims expected to drop to 241K from 244K a week earlier
3.00 pm – US pending home sales (March): expected to decline 0.2% after growth of 5.5% a month
9.30 am – UK GDP (Q1, preliminary): UK growth forecast to be 0.4%, down from 0.7% in Q4. YoY figure forecast to be 2.2%
10.00 am – Eurozone inflation (April, flash): Expected to rise to 1.8% YoY, while core price growth rises to 1% from 0.7%
1.30 pm – US GDP (Q1, preliminary): growth expected to rise from previous 2.1%
2.45 pm – Chicago PMI (April): expected to fall to 56.2 from previous 57.7
3.00 pm – Michigan confidence index (April, final): forecast to hold steady at 98