Sterling started the week under pressure following poor data releases in recent days. April’s Gfk Consumer Sentiment hit its lowest level since the Global Financial Crisis of 2008 as the reading has preceded four of the last five recessions in the UK. Additionally, the drop in the Retail Sales from -0.3% estimated to -1.4% emphasizes that the UK economy is losing momentum. The markets are concerned that spending will remain low for the foreseeable future as consumers are prioritising where to put their money with the ongoing squeeze in living.
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The Euro continued to struggle yesterday against the Dollar following comments by Jerome Powell on Friday. The single currency did show some signs of strength against other majors but drifted lower throughout the afternoon and fell slightly against Sterling. ECB’s Panetta spoke yesterday afternoon and spoke about Crypto currencies which he claimed are like a Ponzi scheme. He stated Crypto-assets still comprise a small share of total global financial assets (about 1%) but they already have a larger market than sub-prime mortgages had before the global financial crisis started. On the data front, German IFO Expectations for April came in at 86.7, above expectations of 83.5.
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US equities staged a recovery in the latter hours of US trade, the dominant force in FX markets on Monday remained risk-off flows, with traders citing China lockdown concerns as the major driver. Traders reassessed global growth prospects amid the rising risk of a wider shutdown of the world’s second-largest economy. The safe-haven US dollar therefore has benefited because of risk-off flows and was the second-best performing major G10 currency, with the Dollar Index (DXY) hitting fresh highs since March 2020. The Dollar has the potential for further gains as market-wide risk aversion grips investors amid the ongoing Russia-Ukraine war and hawkish comments from the Fed. Last week, markets tumbled following comments from the Fed implying a strong hawkish bias despite a slew of volatility-inducing influences.
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13.30 Durable Goods Orders (Mar) Exp. 1% Prev. -2.1%
13.30 Nondefense Capital Goods Orders ex Aircraft (Mar) Exp. 0.5% Prev. -0.2%