Key Points
UK Inflation set to fall below 10% for the first time since September 2022.
US Federal Reserve expecting a ‘mild’ recession towards the end of the year.
Manufacturing and Services PMI for UK, US and EU set for release on Friday.
Market Update
GBP
Sterling went nowhere fast last week, struggling to make much progress above the $1.25 handle, before some late USD demand after poorer than expected US retail sales saw the quid end the week practically where it started
It seems that the pound may be in need of a new catalyst to break decisively north of present levels, which are roughly cable’s best in 10 months, especially as expectation mounts that the BoE will leave rates unchanged at the next meeting in mid-May
We should gain more clarity on the policy outlook this week, with the UK data calendar busy, including the latest labour market (Tues), inflation (Weds), retail sales and PMI (both Fri) reports, all of which will be pivotal in determining the next action that the BoE will likely take
EUR
The common currency rose briefly north of $1.10 last week, for the first time in almost a year, as the EUR continues to benefit from a steady stream of hawkish ECB commentary, implying that at least a couple more 25bps rate hikes are still to come
Of course, the EUR is also benefitting from the broad-based USD weakness that continues to be the dominant theme of the G10 FX space, though the continued strong performance of European equities (the Stoxx 600 gained for a 4th straight week last week), and subsequent overseas inflows are also likely providing support
Looking ahead, this week is somewhat quiet in terms of ‘hard’ economic data, with only Friday’s PMIs, as well as the latest German ZEW sentiment surveys for markets to chew over; though a plethora of ECB speakers will again pop up throughout the week
USD
The USD remains rather unloved by FX traders, as the macroeconomic remains in the middle of the so-called ‘dollar smile’ – i.e. US data shows the economy slowing in line with its peers, while the Fed’s hiking cycle is also set to conclude at a roughly similar time to most G10 peers
This leaves investors with little cause or reason to buy the USD at present, with such a theory not helped by last week’s FOMC minutes, which showed Fed staff forecasting a “mild recession” later this year at the March meeting
This week, the data calendar is lacking in top-tier releases, with those figures due for release mainly centring on the housing market, and unlikely having any significant market impact; instead, corporate earnings, and another busy week of FOMC speakers, are likely to be the most significant drivers of USD volatility
World News
Sega Sammy, the gaming firm that created Sonic the Hedgehog, has agreed a deal to purchase rival Rovio Entertainment – best known for Angry Birds. The pair confirmed that the Japanese company would pay £625 in hopes to accelerate its growth in the global gaming market. However, the deal is subject to shareholder and regulatory approval, over fears it may reduce competition.
Fighting has erupted in the Sudanese capital of Khartoum, following days of tension within the country’s military leadership. The two military leaders Gen Abdel Fattah al-Burhan and Gen Mohamed Hamdan Dagalo, have clashed over the direction that the country is going in and the proposed plan to move towards civilian rule.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 18th April | CA | CPI m/m | 0.40% | 0.60% |
| Wednesday 19th April | UK | CPI y/y | 10.40% | 9.80% |
| Friday 21st April | EU | Manufacturing and Services PMIs | ||
| Friday 21st April | UK | Manufacturing and Services PMIs | ||
| Friday 21st April | US | Manufacturing and Services PMIs | ||
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7871.91 | 7871.91 |
| DAX | 15807.5 | 15838.89 |
| CAC40 | 7519.61 | 7535.39 |