The macro data-release calendar will remain light until tomorrow and therefore geopolitics will seemingly be driving the currency markets for now. Specifically the US and China announced over the weekend that they would not for now carry out their threats to introduce tariffs on each others’ imports.
While this agreement is at best vague, US equities closed up nearly 1% yesterday and the Australian and Canadian Dollars (currencies of two economies exposed to Chinese and US developments) and by extension the Kiwi Dollar have outperformed. Price action in other major currencies has been muted.
Sterling has given back some of its recent gains but, like the Euro, ultimately remains in a tight trading range. Focus today will be on Bank of England Governor Carney, along with MPC members Ramsden, Saunders and Vliegh who are due to appear at 10.00 before Parliament’s Treasury Committee to testify on inflation & economic outlook. Based on precedent, expect a lot of noise but little new information and a hearing unlikely to materially change Sterling’s course.
More important will be CPI-inflation and retail sales data for April due for release tomorrow and Thursday respectively. Consensus forecast is for broadly stable headline and core CPI-inflation and a 0.8% mom rebound in retail sales after a 1.2% mom fall in March. This may prove a tad optimistic and Sterling could conceivably wobble.
