Today’s macro highlights:
Economic calendar remains quiet; ECB forum in focus
With limited economic news on the agenda yesterday, it was perhaps no real surprise that we saw little overall direction for the major currency crosses. One reading worthy of note however was the forward-looking NAHB home building figure from the US, which came in slightly below expectations. It’s only one reading, and a lower priority one at that, but it does play towards the idea that this latest leg of expansion for the US economy may be reaching a plateau.
Speeches at the ECB-lead forum in Sintra, Portugal, today will be under some scrutiny. There’s some anticipation that Mario Draghi could offer up further clues over monetary policy and given the pummelling the Euro took last week in relation to that modest delay in winding down the QE program, further clarity over this process or indeed estimates as to when the first interest rate hike will occur could serve to cheer the common currency.
Across the Atlantic we have yet more forward-looking housing data in the shape of building permits at 1.30pm BST. Because this reflects both anticipated future demand and also the availability of cash to support such projects, again it’s a number that will be worth watching. US GDP forecasts for the year are certainly looking upbeat so this should be reflected here. However as noted earlier, any suggestion that rapid economic expansion is running out of steam may be reflected by a slow-down in property development. The absence of more significant readings also serves to up-weight the significance of this number today.
We have a very quiet few days on the economic calendar for Sterling ahead of Thursday’s rate call from the Bank of England. Political activity however continues apace with the House of Lords having yesterday rejected the House of Commons revised proposals over what power MPs will have in the event that there is no final agreement made with the EU over the divorce process. In short, this is seen as a defeat for Theresa May so progress when the bill is returned to the House of Commons for further debating tomorrow should be closely followed. As we have noted previously, the downside risk to the Pound from political uncertainty should not be underestimated.
There’s still nothing of note to provide support for the pair, which continues to drift lower. The stark divergence in growth forecasts for the year between the UK and US economies underlines this weakness, whilst the political risk adds another layer of uncertainty for Sterling. Fresh lows for the year remain within reach.
The pair drifted higher through yesterday’s session, but the last few hours have seen steady selling. There are concerns over trade tensions escalating further and this is being seen as dollar-positive. Any comment from Mario Draghi today on monetary policy could provide some fresh direction and after last week’s sell-off, the potential could be weighted to the upside.
The Pound is steadily giving back those gains from the end of last week but with sluggish UK growth and political risk in Westminster front of mind, this is perhaps to be expected. Unless we see some hawkish sentiment in Thursday’s BoE statement then the downside pressures could prevail.