UK mortgage approvals hit a 6 year high with 74,000 in February, and net lending also increased, although both results are unlikely to be repeated in the short term. A government spokesman stated post brexit trade talks were continuing but it’s unlikely much will be achieved in the current environment and there were calls to extend the transitional period from the European side. Sterling had another tumultuous day and rumours of further lockdown measures tipped it southward again but the market bought on the dips on faint hope that the coronavirus spread was slowing. The Pound settled near 1.2400 on the Dollar and the Euro fell back to lows around 1.1275.
The Lloyds business survey dropped to 6 in March, down from February’s 23. Sterling has retreated to 1.2330 against the Dollar and the Euro recovered to the1.1200 region. Q4 UK current account data printed better than expected triggering a move back above 1.2350 on the Dollar. The Q4 GDP showed 0 growth, as expected. The volatility warning remains and month-end position adjustment is liable to exacerbate already choppy conditions.
The Dallas Federal Reserve (Fed) manufacturing index declined to -35.3 for March from 16.4 previously and the wider general conditions index crashed to a reading of a record low of -70 from 1.2 the previous month with less than 0.5% of respondents stating that conditions had improved over the month.
Despite domestic fears, the dollar overall continued to make headway with support from reservations surrounding the global growth outlook and weaker equity markets. The US currency maintained a strong tone even when equity markets recovered ground with evidence of month-end dollar demand and the Euro declined to lows around 1.1010 before a correction. There is scope for further dollar buying on positioning grounds today with the Greenback against the Euro around 1.1020.
The Eurozone industrial sentiment index declined to -10.8 for March from -6.2 previously with a sharper downturn in services, albeit slightly over consensus forecasts. German consumer prices also increased 0.1% for March with the year-on-year rate declining to 1.4% from 1.7% and matching market expectations.
The German council of economic advisors have stated that a recession is unavoidable this year and with the baseline scenario of the situation normalising over the summer, thus leading to economy forecasts contracting 2.8% this year. There were, however, two alternative scenarios with a GDP contraction of up to 5.4% before a recovery next year.
The Euro was unable to make any headway during the US session and declined to the 1.1050 area. As of writing the common currency finds itself hovering around the 1.10 level against the Dollar.
Data to watch
06:00 - GBP - Current Account
13:45 - USD - Chicago PMI
14:00 - USD - CB Consumer Confidence
Posted in Daily Market News on Mar 31 2020