News & Analysis


The dollar remained dominant yesterday, reaching a fresh 23 month high as measured by the DXY index. Yesterday’s data was firm, with Durable Goods rising a solid 0.4% and Unemployment Claims rising slightly to 230,000 for the week, slightly up from the mind bogglingly low prints of the last few weeks. Given the dollar’s dominance this week, today’s 13:30 BST release of Q1 GDP data will be crucial for judging how much further the greenback can extend its gains. Median expectations are for growth to print at a solid 2.3% annualized rate, up from 2.2% in Q4.


Sterling had a relatively uneventful day, rallying after a midday slump to close broadly flat against the US dollar. Hopes faded for a bipartisan Conservative-Labour agreement for a withdrawal bill through Parliament yesterday, after Theresa May reportedly dropped plans for a vote before next week’s local elections. The Confederation of British Industry released its Realizes Sales Index, which showed their first year on year improvement since November of last year – consistent with red-hot official retail sales figures. Today at 09:30 BST housing loan data will be released by UK Finance.


The euro also gave some ground to yesterday’s tide of US dollar strength, but traded in a tight range. Spanish Unemployment was higher than expected at 14.7%, ahead of the weekend’s elections which are likely to result in weeks of coalition negotiations. After most markets close today, ratings agency S&P will update their assessment of Italy’s creditworthiness. In October, the agency rated Italy’s debt one notch above junk status, and the risks are tilted to the downside for today’s assessment given the darkening of Italy and europe’s growth prospects since then. Given the precarious state of the euro, particularly against USD, a credit downgrade and fresh fears of political and financial tension has the potential to make next week interesting for the single currency.


The loonie fought back a midday selloff to close flat against the dollar, generally performing well against its G10 peers as a result. The WTI crude oil benchmark is trading lower this morning compared to the start of the week, although the retracement look small in the context of the overall upwards trend of the past four months, which has seen it rise from $42 a barrell to this week’s high of 66.60.