FX markets were reasonably subdued overnight, although Sterling did make small gains versus the Euro. The Sterling trade-weighted-index (TWI) is now up about 0.3% since Bank of England governor Carney’s speech on 20th April, despite the ruling Conservative Party suffering yesterday yet another defeat in the House of Lords in a vote on Brexit-related legislation.
Focus will likely turn to the European Central Bank’s policy meeting announcement at lunchtime. The ECB is very unlikely to change its policy rates or even tweak the parameters of its quantitative easing program. However, the tone of its statement may well be on the dovish side of neutral given that Eurozone CPI-inflation was only 1.3% yoy in March and business confidence has rapidly come off the boil. With this in mind, the ECB could well again flag concerns about the Euro’s “volatility”, which markets have interpreted as coded language for the Euro’s strength. This admittedly light verbal intervention against the Euro has at the margin likely contributed to the Euro TWI trading in narrow sub-3% range year-to-date.
