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A Quiet Day on the Economic Calendar Puts Geopolitics Front and Center

Bob Mason
A quiet day on the economic calendar will keep the Pound in focus. Will there be calls for a snap general election?

Earlier in the Day:

Economic data was on the lighter side this morning, with key stats limited to March inflation figures out of China.

Outside of the numbers, the markets also responded to the latest FOMC meeting minutes the EU’s decision to approve a Brexit extension to 31st October.

Of interest through the European and U.S sessions on Wednesday was the lack of market interest in the IMF global growth forecasts that were released on Tuesday.

Out of China,

The annual rate of inflation accelerated in March, rising from 1.5% to 2.3%, which was in line with forecasts. A 0.4% fall in consumer prices, month-on-month, however, was greater than a forecasted 0.2% decline.

In spite of the monthly fall, wholesale prices rose by 0.4%, which was in line with forecasts. Wholesale prices rose by 0.1% in February, month-on-month.

The Aussie Dollar moved from $0.71659 to $0.71640 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.11% at $0.7163.

Elsewhere,

The Japanese Yen down by 0.05% to ¥111.07 against the U.S Dollar, while the Kiwi Dollar was down 0.06% to $0.6762 for the session. Risk off sentiment through the early part of the day weighed on the Kiwi and Aussie Dollar, while the Yen struggled to return to ¥110 levels.

In the equity markets, the ASX200 closed out the day with a 0.36% loss. The Hang Seng, and CSI300 were also in the red at the time of writing, down by 0.75% and 1.79% respectively. Bucking the trend was the Nikkei, which was up by 0.10% ahead of the close.

The Day Ahead:

For the EUR

Economic data due out of the Eurozone is limited to finalized inflation figures for Germany and France. Following Wednesday’s ECB press conference, the numbers are unlikely to have a material impact on the EUR.

Unsurprisingly, ECB President Draghi continues to see Eurozone risks tilted to the downside, a recent string of economic data supporting the dovish outlook.

The lack of stats will leave the EUR exposed to geopolitical risks and risk sentiment in general.

At the time of writing, the EUR was up 0.05% at $1.1280.

For the Pound

There are no material stats due out of the UK later this morning. While the Pound found support through the early part of the day, rumblings in Parliament could dictate direction through the latter part of the day.

The EU gave Britain an extension to 31st October, largely thanks to French President Macron. This goes beyond the requested extension to the end of June and yet again demonstrates the EU’s self-interest.

While the extension will be considered good news, Britain only narrowly avoiding a disorderly Brexit. Theresa May could find herself in some hot water in the coming days. There’s certainly sufficient time for a snap General Election ahead of the 31st October deadline.

At the time of writing, the Pound was up 0.06% to $1.3099.

Across the Pond

March wholesale inflation figures and the weekly jobless claims numbers are due out of the U.S

Barring material deviation from forecasts, the numbers are unlikely to have a material impact later this afternoon. The FOMC meeting minutes overnight revealed the FED’s view on inflation. A lack of inflationary pressure will continue to support the hold on interest rates through the remainder of the year.

Outside the numbers, market risk appetite will provide direction throughout the day. The markets will also need to consider FOMC member chatter through the day. Following the release of the FOMC meeting minutes, we can expect the markets to be receptive to the chatter.

Members Clarida, Williams, and Bullard are due to speak after FED Chair Powell, who will be speaking in the early afternoon.

At the time of writing, the Dollar Spot Index was down by 0.04% to 96.905.

For the Loonie

It’s another quiet day on the economic calendar, leaving the Loonie in the hands of market risk sentiment and crude oil prices. Following the Loonie positive OPEC monthly report on Wednesday, the monthly IEA report today will provide some further color on supply and demand.

The Loonie was down 0.17% at C$1.3342, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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