The Pound gained on a weaker US Dollar as the markets opened yesterday, moving above 1.2500 for the first time in a week as risk conditions improved. The CBI’s headline retail sales figure declined to -55 in April, down from -3 previously and a record equalling low. Expectations for May’s figure declined to a new record low of -54 for May. Although food businesses had posted strong growth in March, social distancing restrictions curbed shopping numbers and sales in April.
Boris Johnson promised that coronavirus testing will be expanded and that social distancing rules would be reviewed by May 7th. A stronger Dollar clawed back some ground later in the day but there was Pound support below 1.2400 and a recovery to 1.2475 this morning on expectations of a dovish Fed statement. The Euro held close to 1.1500 as unease over UK/EU trade talks limited potential Sterling support.
Choppy trading conditions are expected into month-end, especially with significant central bank meetings scheduled over the next two days.
US consumer confidence declined sharply to a 6-year low of 86.9 for April from 118.8 the previous month and slightly below consensus forecasts. The current conditions component slumped to 76.4 from 166.7 and this was the largest monthly decline on record, but there was a small improvement in the expectations component to 93.8 from 86.8. Consumers expect overall conditions to improve slightly over the next six months, although a small majority expected their own income prospects to decline.
The Richmond Federal Reserve (Fed) manufacturing index declined very sharply to -53 for April from +2 the previous month with new orders and backlogs both declining sharply. The number of employees declined while wages were unchanged and overall skills shortages eased slightly.
There was evidence of month-end dollar selling in relation to portfolio rebalancing which is liable to continue on Wednesday. There was also an element of caution ahead of today’s Fed policy decision and the dollar regained some ground later in the session with the Euro settling around 1.0830 against the Euro.
The Euro rose sharply early in the European session yesterday as firmer risk conditions curbed demand for the US currency. The German IFO institute forecasted GDP would contract 6.6% in 2020 as Spain announced that it was aiming for a return to normal at the end of June with further limited easing of restrictions over the next few weeks.
The Euro strengthened to highs just below the 1.0890 just ahead of the New York open, but soon corrected during US trading with the Euro retreating back down to 1.0820.
As of writing, the Euro trades around the 1.0865 against the Dollar.
Data to watch
12:30 - USD - Advance GDP
12:30 - USD - Advance GDP Price Index
14:00 - USD - Pending Home Sales
18:00 - USD - FOMC Statement
18:00 - USD - Federal Funds Rate
18:30 - USD - FOMC Press Conference
Posted in Daily Market News on Apr 29 2020