GBP/USD is trading just off the 1.28 mark

Christin Tuxen Danske Bank A/S

Market movers today

A relatively quiet day once again on the data front, with the main release in the euro area being consumer confidence. The latest euro-area unemployment figures showed a decline in February to 9.5%, and such decent employment growth cont inues to support increasing consumer confidence, which we expect to see increased to -4.1 in April. Like financial and business sent iment , consumer confidence has also proved fairly resistant to polit ical uncertainty, so we expect it to continue on an upward t rend despite the uncertain polit ical climate.
No major Scandi events are scheduled for today.

Selected market news

Markets calmed somewhat overnight following the upheaval in political risks over the past 10 days. The Fed’s beige Book last night painted a st ill relat ively upbeat picture of the US economy, which was echoed by the Fed’s Fischer, suggest ing that the global economy is now more robust to t ighter monetary policy. Moreover, st rong Japanese export data out this morning is adding to global-growth sent iment . We st ress, however, that our cyclical lead models paint an increasingly negat ive picture of the growth prospects across the US, Europe and Japan, and we would not be surprised to see a cyclical peak in especially the US in the near future. Oil prices dropped significant ly on US data showing surging oil product ion and inventories. Equity markets have been mixed but energy stocks in part icular are suffering as oil prices dropped on surging US product ion and inventories with Brent oil just above the USD53/bbl mark. Finally, a st rong CPI print out of New Zealand, which saw inflat ion reach the 2% target for the first time in five years, has sent NZD/USD higher.

UK PM Theresa May received House of Commons’ backing for her 8 June election call yesterday, and GBP/USD is trading just off the 1.28 mark, levels not seen since October last year, with UK stocks suffering as a result . The elect ion campaign is now on with the Tories maintaining a decent lead.

Yesterday in an interview with the FT, US Treasury Secretary Steven Mnuchin commented on a range of the initiatives proposed by the Trump administration. Notably, Mnuchin said that while the tax plan remains a key priority for this year, August seems an unrealist ic deadline. Plans to boost growth via infrast ructure investment also remain on the table for 2017 but seem unlikely to provide a growth boost before next year , in our view. The Treasury also appears keen on incent ivising repat riat ion of foreign profit (i.e. with a so-called Homeland Investment Act 2) but Mnuchin was more reluctant to provide out right support for border-tax adjustments, st ressing that there are both pros and cons to this inst rument. The lat ter essent ially works as an import tariff/export subsidy and could thus, depending on the actual implementat ion, spur USD appreciat ion, which would not be welcomed by the Trump administ rat ion.

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Christin Tuxen

Danske Bank A/S

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