Stock index futures trended up after S&P 500 closed 0.8% higher

Market movers today

• Today, we will get the UK labour market report for February. We expect the annual growth rate of average hourly earnings excluding bonuses (3M average) to increase to 2.8% y/y from 2.6% y/y, as the weight of the monthly fall in December 2016 becomes less important. We believe the unemployment rate (3M average) will remain at 4.3%.

• In the euro area, German ZEW expectations for April are being released where consensus is for another fall to -1.0 from 5.1. The survey will give some early insights on how much recent geopolitical uncertainty and US-China trade war tensions have weighed on investor economic sentiment.

• In the US, industrial production data for March is due out. Industrial production is quite volatile but both PMI and ISM manufacturing are signalling that expansion will continue.

• Another set of Fed speakers is on the agenda today, including Williams (voter, neutral).

• The IMF will publish its semi-annual World Economic Outlook today, containing its new global and country level economic projections.

Selected market news

Stock index futures trended up after S&P 500 closed 0.8% higher, as investors shift their focus to corporate results from geopolitical tension. However, President Trump has rediscovered the currency topic, tweeting yesterday that both Russia and China are playing an unfair devaluation game against the Americans. USD sold off on this and extended losses against most peers in Asian trading this morning, with EUR/USD trading at 1.238 at the time of writing. We do not think that China is keeping its currency artificially weak to gain a competitive advantage and neither does the US Treasury department in its latest currency report, where none of the US's primary trading partners were labelled a currency manipulator (see tweet ). Instead, we think the rhetoric is clearly linked to the ongoing trade dispute with China, where the next round of escalation could start this week (see also Flash Comment: Is Trump preparing for a round of trade escalation - again? ).

Last night it was made official that Trump is nominating Richard Clarida for Fed Vice Chair, succeeding Stanley Fisher, who stepped down in October. In our view, it is a good choice given Clarida's very strong background as he has done much research on monetary policy, served as Vice Treasury Secretary and has worked at a financial institution (PIMCO, one of the largest fixed income investment firms). Clarida still needs Senate approval before taking up the position. Based on Clarida's recent comments, he is likely to be a centrist supporting the current policy of gradual hikes (three to four hikes this year). While we think the Fed is on autopilot at the moment, it is good in the long run with a very skilled Vice Chair, as the Fed has lost a lot of human capital with Janet Yellen, Stanley Fischer and soon William Dudley leaving the FOMC. Besides Clarida, Trump has nominated Michelle Bowman for Fed Governor (also requiring Senate approval).

Download The Full Daily FX Market Commentary