Fortunes turn for Eurozone data
April 30, 2019
The euro seems to have weathered the storm, for now anyway, after it pounced on a softening US dollar yesterday. This morning’s data releases bode well for the single currency, with Spains flash Q1 GDP reading surprising to the upside at 0.7% and Germany’s Saxony CPI print showing a marked improvement from last month’s 1.4% to come in at 1.9% YoY in April. Meanwhile, France’s economic growth came in on expectations at 1.1% YoY. The driver for the uptick in German inflation seems to have been a significant improvement in package holidays, which rose from -6.4% to +11.2%. The Saxony measure is a good gauge of Germany’s overall inflation reading, with the nationwide CPI figure set to be released 13:00 BST – just after the EZ composite Q1 GDP release at 10:00 BST. The data calendar is plentiful for the euro, and the tone has been well and truly set this morning enabling the single currency to bat off poor manufacturing data coming out of China.
Sterling continues to float with the current set by the rest of the G10 currencies against the dollar. GfK’s consumer confidence measure continued to flash red at -13 this morning but had limited market impact as the British consumer continues to open their purse strings to prop up the economy. With little scheduled in the data calendar, the main newsworthy story out of yesterday’s session centred around the BoE Governor’s comments regarding the bank’s 2016 Brexit forecasts. Carney stated he wasn’t sorry for the predicting an over exaggerated Brexit impact, outlining what the bank expected to happen did, in theory, happen. Today may be a dud for the pound as it builds towards a heavy data calendar and a political scene that is expected to heat up in tomorrow’s PMQs – the first with both opposition leaders since the Easter recess.
The dollar softened yesterday after yet another poor inflation print for March. The Personal Consumption Expenditures price index, the Feds favoured inflation measure, fell below expectations coming in at 1.5% YoY. More worryingly, the core measure failed to grow in the month of March dragging the year-on-year figure down to 1.6%. The Federal Reserve continues to battle with mixed data signals out of the US. Last week saw Q1 growth come in at 3.2% but inflation and wage growth measures have both been declining, suggesting the US economy isn’t as late cycle as previously thought. Friday’s labour market data could potentially shed some light on this, and evidence if last month’s downturn in wage growth was a transitory effect or not. Today, however, the dollar holds firm after Chinese manufacturing data surprised to the downside this morning, sparking a general risk-off move in markets.
The loonie has recently disconnected from the firming oil prices as it battles with poor economic data releases and an increasingly dovish Bank of Canada. Today, the theme looks set to continue with February’s GDP release expected at 13:30 BST where the consensus among forecasters suggests there will be no monthly change in the size of economic output. This is as expected by the central bank, who anticipate growth will remain lacklustre until the next quarter where higher oil prices begin to filter through into higher investment. The bar is set low for the loonie today, especially as it takes on water against the US dollar this morning, suggesting a reversal of fortunes could be forthcoming should the GDP release surprise to the upside.