May 17, 2024

“Now that the big post-CPI dollar slide has run out of steam, the FX markets are taking a breather today. Traders are instead bracing themselves for a packed schedule next week, when sterling is set for some big clues.”

Sam Cornford – Head of Trading

Main Headlines

China unveiled a series of significant measures on Friday aimed at stabilising its crisis-stricken property sector, including the purchase of apartments, looser mortgage regulations, and commitments to finish uncompleted housing projects. The measures came in response to recent data that showed the quickest fall in new home prices in over nine years.

Reality television stars are among nine individuals charged in Britain for promoting unauthorised trading schemes on Instagram, marking the first major crackdown on “finfluencers” by the UK’s Financial Conduct Authority (FCA) as part of ongoing efforts to regulate financial promotions on social media.

GBP

While sterling’s momentum cooled off yesterday as the dollar selloff ran out of steam, Wednesday’s moves were enough to keep it on track for its second-best week so far this year. Next week is a busy one – after Bailey speaks on Tuesday, CPI, the flash PMIs, and retail sales all follow on Wednesday. For today, however, we’re limited to a speech by Catherine Mann this morning. She’s a known hawk and one of the last to give up voting for further hikes, so we will likely be offered a more cautious tone compared to some of her optimistic colleagues on the MPC.

EUR

The euro continues to enjoy a positive month against both the dollar and sterling despite a quiet economic calendar, as it broadly benefits from weakness elsewhere. There has been a boost to the growth outlook, but expectations for the ECB’s easing cycle have become relatively stable since policymakers became explicit in its guidance for a June cut. Speakers yesterday broadly confirmed this outlook but there is some growing caution about further cuts down the line, with Schnabel firmly in the camp concerned about upside risks to inflation in the second half of the year. Today, the final revision to April CPI comes this morning, and a fresh slew of speakers include de Guindos, Vujcic, and Holzmann, although it is difficult to imagine any of them coming out with some fresh rhetoric that materially changes the outlook for the euro just yet.

USD

The dollar clawed back some its post-CPI losses yesterday as caution and uncertainty at the Fed spurred a stall in the selloff. Unemployment claims returned to the limelight with investors hoping for another softer print after last week’s 232K, but the data ultimately fell flat and returned to 222K, somewhat tempering the rate cut exuberance. While industrial production and building permits were slightly weaker-than-expected, stabilisation remained the name of the game in yesterday’s trading. The CB Leading Index is the only piece of data in the diary today, ahead of speeches by Waller and Daly.

Markets

The post-CPI enthusiasm quickly waned yesterday as stocks became directionless, snapping winning streaks and easing from record highs across the globe. The European Stoxx 600 ended its nine-day streak in the green, while the S&P 500 fell around 0.3%.

Main Economic Events (All Times CET)

4:00am: Chinese Industrial Production & Retail Sales
10:00am: BoE’s Mann speaks
11:00am: Eurozone Final CPI
4:15pm: Fed’s Waller speaks
6:15pm: Fed’s Daly speaks

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