Good morning,

USD: Keeps chugging higher

Yesterday was a six-week high in the USD and we open up this morning with the wider USD at the highest level in nearly four months. Strong tech earnings overnight from both Microsoft and Facebook are driving higher equities so we are left in the rather strange situation wherein the dollar is rising, stocks are also moving higher and markets are talking more and more about the Federal Reserve ending its pause in rate hikes soon.

Today’s durable goods orders number are always volatile but once again could be enough to show that US factories continue to run well despite fears over additional tariff charges in the future. We will be watching initial jobless claims closer however as they have been incredibly strong of late and are crucial to next week’s payrolls announcement and the path of the US dollar.

GBP: In the Game of Thrones, you win or get really bored

Theresa May has survived another attempt to haul her out of Downing Street at Tory backbenchers decided not to change the rules in order to have another vote on her leadership. The next time a confidence vote can take place then in Theresa May as PM, therefore, remains December 12th. Of course, Theresa May has also said that she will leave once the first stage of Brexit has taken place – the passage of the Withdrawal Agreement – and not take the Conservative Party into the next general election whenever that may be.

Once again, in the boring version of ‘Game of Thrones’ that is UK politics, nothing has changed. Sterling is once again ambivalent about the whole thing but traded a little higher through yesterday’s session.

Today we will gain a fresh look at the retail picture in the UK through the month of April although this CBI release diverged markedly from last week’s ONS numbers; UK retail remains strong as a result of higher wages and a competitive retailing landscape. As someone joked to me last week, when the apocalypse comes the only people left will be Brits who are looking to buy a fridge on credit.

Sterling will once again remain at the whim of other currencies today and shouldn’t stray too far from the 1.30 mark in GBPUSD.

EUR: Recovery delayed again

Another day, another disappointing sentiment number from the Eurozone. Yesterday’s IFO number showed both a fall in sentiment for the current economic situation and expectations for the future. This is not a disastrous release but once again clips the heels of those of us who are looking for more optimistic numbers from the wider Eurozone economy, and a stronger euro as a result.

We will turn our attention to the manufacturing sector in the coming weeks as it remains an effective ‘canary in the coal mine’ for wider European industrial sentiment. The good news is simply not there at the moment and it will likely take a few months of recovery before actual economic growth starts to turn more positively.

All the while, we expect the euro to remain in many people’s crosshairs ahead of next month’s European elections. We maintain that, while the chances of populist overtaking of the wider political discourse in the European Union are low, a wider diaspora of representative views within the European Parliament make policy expectations a little more unpredictable.

Have a great day.