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Global market watch - 13th April 2021

Fed Chair Powell continued his supportive message for the US economy, and his thoughts that US GDP growth could be 6.5% this year coincide with the IMF’s positive appraisal of the United States strongly emerging from the pandemic. CPI is expected to be 0.5% when it is released today, but we consider an upward surprise would be in order as the stimulus packages are due to work their way through the system. Yesterday, Fed St Louis President Bullard tied monetary policy changes directly to vaccination success rates. There was also news that the US will not label China a currency manipulator.
The oil price was particularly uninspiring and was mirrored by the CAD, which slipped lower against the USD in early trading before retracing its losses later.
EUR/USD slowly pushed higher again on very little news. Retail sales were a positive 3% gain, which were much better than the expected 1.3% increase. ZEW economic sentiment was worse than expected and produced a 66.3 reading rather than 77.2.  It was also announced that Germany was going to tighten the pandemic conditions. EURUSD remained unimpressed and squeezed higher on the day before important US CPI.

The dollar was on the backfoot after Fed Chair Powell’s earlier comments, and GBP/USD had managed to stay above 1.3670. We have just had the release of UK GDP and trade data as well as industrial and manufacturing production, GDP growth for February was 0.4% so slightly below the 0.5% suggested. The goods trade deficit grew to £16.4 billion and was worse than the £10.4 billion forecasted. Industrial production doubled its expected result and manufacturing production did even better, rising 1.3% rather than the 0.5% proposed. Some analysts are suggesting that the poor trade data has been exaggerated because of pre-Brexit stockpiling; we suspect, however, this not to be the case. The market is also very aware of the release of important CPI this afternoon, so the pounds reaction to the UK data has been muted so far.
Business confidence was 15, so below last month’s reading of 18. This hasn’t been able to cause any great AUD volatility.
The main news for Asia was the release of excellent Chinese trade data which showed exports surging 30% from levels one year ago.

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