As US economic data continues to hold up relatively well against other major economies, the dollar continues to perform well. Although not tier one data, this was laid bare once more yesterday as data releases from the US and Eurozone put the two economies on seemingly divergent paths. Eurozone consumer confidence posted a big miss, whilst US New Home Sales posted a big beat. In the past month, the US trade weighted Dollar Index has strengthened around 2%, as a string of positive data has driven consistent upward revisions of Q1 GDP. In that time, the Atlanta Fed’s GDPNow forecast has gone from around +0.5% to +2.8%. Traders are clearly anticipating an encouraging number now in Friday’s Advance GDP release. This has been as the Eurozone has posted continued economic struggles. Even overnight, Australian inflation (RBA trimmed mean) missed expectations in Q1 drifting back to +1.6% (+1.7% expected, +1.8% in Q4 2018). This will increase pressure on the RBA for potential easing measures. Bond yield differentials have widened in the favour of the dollar and gold is at four month lows. However, perhaps the most impressive move is in equities. The S&P 500 finished the session last night with an all-time closing high. This relative outperformance of US economy will not last forever, but certainly for now there is a sweet spot for the dollar.
Wall Street closed with strong gains last night in a move which saw the S&P 500 +0.9% and at 2933, beating its previous closing high of 2931. There is a degree of consolidation this morning as US futures are a shade lower at -0.1%. This has tempered the moves in Asia, with the Nikkei -0.3% and Shanghai Composite -0.3%. European markets look similarly cautious, with FTSE futures -0.1% and DAX futures -0.2%. In forex, the continuation of USD gains rolls on, with the main underperformers being on the AUD (down -0.9% after the inflation slide) and NZD -0.5%. However, it is interesting to see that JPY continues somehow rebuff a surging dollar. Commodities are a little mixed today with gold a touch lower by -$1, whilst oil is just slipping back after a big run higher earlier in the week.
Early in the European session there is a key focus on a key indicator for the health of the German economy. The German Ifo Business Climate at 0900BST began to tick higher last month and is expected to improve again to 99.9 in April (up from 99.6 in March). It is also worth keeping an eye on the Ifo Current Conditions too which is expected to improve to 103.8 from 102.6 last month. The UK public borrowing requirement for March is at 0930BST and is expected to be -£0.4bn (-£0.3bn in March 2018). The Bank of Canada monetary policy decision is at 1500BST and is expected to show no change on rates at +1.75% (+1.75% in March). The EIA Oil Inventories are at 1530BST and are expected to show a crude oil drawdown of -0.2m barrels (-1.4m barrels last week). Distillates are expected to drawdown by -1.3m barrels (-0.4m last week) and gasoline expected to drawdown by -0.3m barrels (-1.2m last week).
Chart of the Day – Silver
Silver has been tracking lower in a downtrend for the past nine weeks. The pressure has been mounting on the long term pivot at $14.90 in the past week and has now finally given way. A close below $14.90 with a decisive bear candle has seen silver close a