Currency Note

Sterling relinquishes weekly and monthly gains against the euro

By Sharyh Murray-Francis April 20th, 2023

Euro Area’s annual inflation rate cooled for a fifth consecutive month to 6.9% in March 2023.

Sterling starts the day weaker than its euro and US dollar rivals compared to this time last Thursday, but is stronger against the dollar on a monthly footing.

On the data front, lots of interesting economic data was churned out for market watchers to digest yesterday. According to Eurostat, the Euro Area’s annual inflation rate was confirmed at 6.9% in March 2023, down for a fifth consecutive month. This marked its lowest level since February last year but is still above the ECB’s target.

In the UK, the latest retail price index increased 13.5% annually and 0.7% on a month-over-month comparison in March of 2023. The indexes were forecast at 13.3% and 0.6%, respectively.

Social media firm, Meta, announced it will cut 4,000 jobs immediately as part of its larger plan to cut 10,000 jobs. The company’s chief executive, Mark Zuckerberg, said the layoffs are part of the company’s “year of efficiency” – which is a plan to reduce costs as Meta struggles to monetize the metaverse (its virtual reality venture).

At lunchtime today, the US will release its latest initial jobless claims. In the previous data, markets saw the number of Americans filing for unemployment benefits rise by 11,000 to 239,000 in the week ending April 8th. This exceeded market expectations of 232,000 and marked the first increase in unemployment claims in three weeks.

The stock markets struggled to make any major moves on Wednesday, with the benchmark Stoxx 600 still down from a 14-month high on Tuesday.

Meanwhile in the US, The Dow lost 100 points on Wednesday afternoon. The S&P 500 and Nasdaq 100 were also down as investors digested fresh earnings reports and pondered the future path of interest rate rises.

Tomorrow, sterling watchers will be keeping a close eye on the latest monthly retail sales figures, which will be released at 7am. After unexpectedly surging 1.2% month-over-month in February, following an upwardly revised 0.9% rise in January, markets are expecting the retail sales index to fall on Friday.

Also on Friday, Federal Reserve governor, Lisa Cook, is scheduled to speak about economic research at an event in Washington DC. Many will be listening for any hawkish comments as these tend to be good for the US dollar.

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GBP: Return of the Gfk consumer confidence survey

The Gfk consumer confidence survey, which will be released on Friday, measures the responses of approximately 2,000 consumers and asks respondents to rate the relative level of past and future economic conditions.

In the previous data, consumer confidence in the United Kingdom rose to -36 points in March, from -38 points in February.

GBP/USD over the past year

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EUR: All eyes on services PMI

S&P global is scheduled to release the eurozone’s services PMI for April (flash) tomorrow morning. The data measures the level of a diffusion index, based on surveyed purchasing managers in the services industry, and is a leading indicator of economic health.

Many will be watching to see if the data triggers any volatility for the euro.

USD: Philadelphia Fed Manufacturing Index at lunch

In the previous data release, the Philadelphia Fed manufacturing index rose 1 point to -23.2 in March 2023. Despite the rise, the index missed market expectations of -15.6, pointing to its seventh consecutive negative reading. Today’s data will be released at 1:30pm UK time.

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