Focus Remains on FED, May & Junker Brexit Talk

Daily Update - 20th February 2019

Yesterday’s Market

• EUR ZEW Survey Economy Sentiment
• GBP Average Earnings

Yesterday Explained

In the data front, the most relevant release was the February ZEW survey, which showed that business sentiment improved modestly in Germany and the EU. The UK released employment data earlier today, with the unemployment rate steady at 4.0% in the three months to December, and average hourly earnings increasing by 3.4% in the same period.

The American dollar eased alongside Treasury yields as down after a long weekend, as equities lost the momentum triggered by optimism about a US-China trade deal. Comments from Fed's Mester, however, brought back the fact that the Federal Reserve has now adopted a dovish stance. Mester said that the reduction in the balance sheet was likely putting upward pressure on the long-term interest rates, now comfortable with slowing the pace of reducing it. She added that economic growth could slow this year, while she sees inflation near the Fed's target of 2.0%.

Today's Market

• USD FOCM Meeting Minutes
• EUR Preliminary Consumer Confidence

Today’s Focus

For the EUR,economic data scheduled for release this morning includes January wholesale inflation numbers out of Germany. Later in the day, February prelim consumer confidence figures for the Eurozone are also scheduled for release. Barring a surprise pickup in inflationary pressures, we would expect the focus to be on the consumer confidence numbers due out late into the European session. On the monetary policy front, the ECB’s Praet is scheduled to speak ahead of the European open this morning. Away from the economic calendar, market risk sentiment will continue to influence. Progress on trade talks will be the positive, whilst concerns over the outlook for growth are expected to be negative for the EUR.

For the Pound, economic data is limited to February’s CBI Industrial Trend Orders. While we will expect the Pound to respond to the number, the Pound will continue to remain in the hands of Brexit chatter as both the Tories and the opposition party face the prospects of party members walking out the door. The British PM is back to Brussels today in a bid to resolve the backstop issue. We can expect the Pound to be particularly sensitive to any chatter through the day.

For USD, it’s another quiet day on the economic calendar, with no material stats scheduled for release. While there are no stats scheduled for release, the FOMC meeting minutes will garner plenty of attention and could pin back the Dollar further.