Sterling was unable to gain any traction and moved lower on reports that Brexit talks between the government and Labour Party had stalled.
Narrow ranges prevailed on Tuesday with the dollar securing a slight advance as fresh dovish ECB reports unsettled the Euro.
China’s latest industrial production data released on Wednesday was well above consensus forecasts which boosted confidence in the domestic and global outlook.
Bond yields moved higher while equities posted only limited net gains with pressure for profit taking. Oil prices posted fresh gains on supply concerns, an API inventory draw, and global growth hopes with Brent hitting 5-month highs.
Defensive assets continued to lose ground with the Swiss franc and gold notable losers with the latter posting 2019 lows. Sterling lost ground despite solid labour-market data and firm risk conditions amid weak investor demand.
The UK unemployment rate was unchanged at a 43-year low of 3.9% in the three months to February, in line with consensus forecasts, while employment increased to a fresh record high despite a higher than expected increase in the claimant count. The annual increase in average earnings of 3.5% met market expectations and the data failed to ignite Sterling buying.
Overall expectations of volatility declined to 15-month lows, but Sterling was unable to gain any traction and moved lower on reports that Brexit talks between the government and Labour Party had stalled. Although these reports were denied, the UK currency was unable to recoup losses as underlying uncertainty continued to stifle buying activity. An investor survey also indicated that institutions were underweight UK equities which will tend to limit capital inflows.
After again failing to hold above 1.3100 GBP/USD dipped to below 1.3050 while GBP/EUR also made slight gains. There was little change on Wednesday with firm risk conditions providing an element of support for GBP/USD. GBP/EUR held firm with markets expecting a slight increase in the UK headline inflation rate to 2.0%.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 09:00 | Consumer Price Prelim MM(MAR) | 0.20% | 0.20% |
| 09:00 | Consumer Price Prelim YY(MAR) | 1.10% | 1.10% |
| 09:00 | CPI (EU Norm) Prelim YY(MAR) | 1.20% | 1.20% |
| 09:00 | CPI (EU Norm) Prelim MM(MAR) | - | - |
| 09:30 | GBP Core CPI (Y/Y)(MAR) | 1.90% | 1.80% |
| 09:30 | GBP PPI Output (Y/Y)(MAR) | 2.30% | 2.20% |
| 09:30 | GBP CPI (M/M)(MAR) | 0.50% | |
| 09:30 | GBP CPI (Y/Y)(MAR) | 1.80% | 1.90% |
| 09:30 | GBP PPI Input (M/M)(MAR) | 0.90% | 0.60% |
| 09:30 | GBP PPI Core Output (Y/Y)(MAR) | 2.3 | 2.2 |
| 10:00 | Euro-Zone Core CPI (Y/Y)(MAR 01) | 1.00% | 1.00% |
| 10:00 | Euro-Zone CPI (M/M)(MAR) | - | 0.30% |
| 10:00 | Euro-Zone CPI (Y/Y)(MAR) | - | - |
| 10:00 | Euro-Zone Trade Balance(FEB) | - | 1.5B |
| 13:30 | Bank of Canada Core CPI (Y/Y)(MAR) | - | 1.50% |
| 13:30 | Bank of Canada Core CPI (M/M)(MAR) | - | 0.70% |
| 13:30 | CAD CPI (M/M)(MAR) | 0.60% | 0.70% |
| 13:30 | CAD CPI (Y/Y)(MAR) | 1.40% | 1.50% |
| 13:30 | USD Trade Balance(FEB) | - | -51.10B |
| 13:30 | CAD Trade Balance(FEB) | -3.50B | -4.25B |
| 14:00 | BoE Gov Carney Speaks | - | - |
| 15:00 | USD Wholesale Inventories(FEB 01) | - | 1.20% |
| 15:30 | USD Crude Oil Inventories | 2.294M | 7.029M |
| 15:30 | European Central Bank Sabine Lautenschlaeger Speaks | - | - |
| 17:30 | FOMC Harker Speech | - | - |
| 17:45 | FOMC Member J. Bullard Speaks | - | - |