The EUR, the Pound and the Dollar – Stats and Trump in Focus

The Dollar has found the start of the week to be somewhat of a challenge as Trump goes about his business, the ways of which are perhaps a surprise to most if not all, the latest revelation being that the U.S President revealing classified information to Russian officials in a meeting last week. Where there’s smoke there is generally fire and, while the Republicans are in damage control by essentially playing the denial card, the timing could not be worse following the ousting of FBI Director Comey, the dust far from settled.

A lack of stats on Monday left had left the Dollar exposed to noise from the Oval Office and it’s not been positive, as we continue to wait on for a tax reform bill and a fiscal stimulus package.

Economic indicators have continued to be mixed of late, while hopes remain high towards a June rate hike, though there has yet to be any compelling evidence to support the view that the U.S economy is going to see a sharp rebound in the 2^nd quarter.

Stats out of the U.S this afternoon will be expected to provide the Dollar with direction, with April building permits and housing starts scheduled for release. Housing sector data has continued to be a barometer on consumer confidence and April figures are forecasted to be a positive, which is also expected to be supported by a continued rise in industrial production.

While stats out of the U.S may distract the markets from the noise from Capitol Hill, one wonders how long it will take before we begin to hear the markets having to consider the possibility of an impeachment, such an event certainly a disruption to the U.S economic outlook and that’s before taking tax reforms and a fiscal stimulus package off the table.

Things are certainly going more smoothly in Europe, with Macron now looking ahead to the June parliamentary elections. It’s too soon for the EUR to be gyrated by sentiment towards the likely outcome, bringing macroeconomic data into play this morning.

Stats out of the Eurozone include 2^nd estimate, 1^st quarter GDP and trade data out of the Eurozone together with Germany’s ZEW economic sentiment and current conditions index for May. While the 2^nd estimate GDP figures are forecasted to be unchanged from 1^st estimate, any sizeable increase in the Eurozone’s trade surplus for March could see figures revised upwards, with Germany’s economic sentiment index also forecasted to see a rise, all of which continues to support the view that the ECB will need to begin shifting on its current dovish position in the summer, assuming the global economy doesn’t implode.

Across La Manche, stats out of the UK are limited to April’s inflation figures. The BoE projections for the economy and inflation for the remainder of the year may have bought Carney and the team some time, but should economic indicators continue to show a resilient economy and a possible rebound in the 2^nd quarter, with inflation making its move towards 3%, it may be hard to sit behind projections for too much longer. With retail sales scheduled for release on Friday, we will certainly have a better picture of how the 2^nd quarter is shaping up, with today’s inflation figures forecasted to provide a boost for the pound, though perhaps more muted than normal, following last week’s BoE projections.

At the time of the report, the Dollar Spot Index was sitting down 0.36% at 98.555, in what looks to be a long and windy road in the wrong direction, while the EUR is up managing to break through to $1.10 levels, up 0.55% at $1.10350 and cable up 0.26% at $1.2929, the pound managing to claw back to $1.29 levels as it paves its way back towards $1.30 levels.

We will expect Dollar weakness to prevail through the day with Oval Office noise likely to overshadow expectations of positive stats out of the U.S, the EUR and the pound expected to see further gains through the European session and quite possibly through to the close.