Nationwide reported an increase in house prices of 14.3% in the year to March from 12.6% previously and the strongest annual reading since 2004. There was also an upward revision to the fourth-quarter GDP estimate to 1.3% from 1.0% and the current account deficit was lower than expected at £7.3bn. Overall confidence in the UK economic outlook remained very fragile amid fears over the impact of a surge in energy costs which will stifle Bank of England rate expectations. Investment banks remained generally cautious over the Sterling outlook. There was, however, an element of month-end Sterling demand and expectations of seasonal gains during April also provided an element of support with investors looking to front-run a potential advance.
There was little net change on Friday as global factors dominated with Sterling trading steady against the dollar.
Key Data
Markit Manufacturing PMI(Mar) Prev 55.5 Exp 55.5
Germany recorded an unemployment decline of 18,000 for March after a 33,000 decline previously and a slightly smaller decline than expected while the Euro-zone unemployment rate edged lower to 6.8% from a revised 6.9% previously. Confidence in the Euro-zone outlook remained fragile.
ECB chief economist Lane stated that policy settings should be adjusted if inflation expectations become de-anchored and added that it is especially important to be data-dependent. The French CPI inflation rate increased to 4.5% for March from 3.6% and the Euro-zone data will be watched closely on Friday. Consensus forecasts are for an increase to a record high of 6.6%, but with concerns that the rate could be at least 7.0%.
There was still an important element of uncertainty over Russian demands that gas supplies to ‘unfriendly countries’ should be paid for in Roubles. In comments on Thursday, Russian President Putin stated that supplies would be cut off to customers that did not comply with new regulations, although it appears that customers will not have to source the roubles themselves which should allow supplies to continue, but tensions will be high.
Key Data
HICP (YoY)(Mar) PREL Prev 5.9% Exp 6.6%
Initial jobless claims edged higher to 202,000 in the latest week from a revised 188,000 previously and slightly below consensus forecasts while continuing clams declined to 1.31mn from 1.34mn. The core PCE prices index increased 0.4% for February which was in line with expectations while the year-on-year increase of 5.4% from 5.2% previously was marginally below consensus forecasts of 5.5%.
The Chicago PMI manufacturing index strengthened to 62.9 for March from 56.3 previously and well above consensus forecasts. The data overall failed to provide dollar support with a net retreat as the yen posted gains on the crosses and the US currency dipped into the London fix.
All eyes will be on the US job numbers today at 12.30pm this should lead to some market movement in the afternoon session.
Key Data
Nonfarm Payrolls(Mar) Prev 678k Exp 490k