Brighter news from Euroland

4 minute read


Higher consumer spending and lower inflation were the key takeaways from the BEA's Personal Income and Outlays report. The report was complicated by an unusual reliance on estimated data, as a result of the government shutdown at the turn of the year. Broadly purchases, which account for more than two thirds of the US economy, increased by 0.9% in March, the biggest increase in ten years and ahead of the forecast 0.7% rise. Meanwhile the core PCE price index, the inflation measure favoured by the Fed, slowed from 1.7% to 1.6%.

Investors concluded that nothing in the report was likely to alter the Fed's "patient" stance when the FOMC meets today and tomorrow. The USD took a few steps to the rear but was on average unchanged on the day in what turned out to be a very quiet market with narrow ranges.


As well as finding some support following the US spending and price data the EUR made headway this morning in Europe following a long list of Euroland data, many of which surprised investors by beating forecast. German consumer confidence was not one of them: it was steady at 10.4 in line with analysts' predictions. The numbers from Spain looked good, with inflation up to 1.6% and gross domestic product expanding by an annualized 2.4% in the first quarter.  

The pan-Euroland economy grew by an annualized 1.2% in Q1, beating forecasts of 1.1% growth. Taken together the data removed some of the gloom from investors' perception of the euro zone economy. Since London's opening the EUR has been facing north and it is 0.4% higher against the USD.


Investors could not make up their minds about the CAD. Although they kept it within a range of less than half a cent they sent it back and forth across that range four times, for a net loss of 0.1% to the USD. There were no Canadian data and oil prices hardly budged.

It could be a different story today when Canada reports on raw material and industrial product prices as well as gross domestic product for February. The price indices will probably not set pulses racing but investor will take a close interest in the February growth figure. They will take an even closer interest in what Bank of Canada governor Stephen Poloz has to say when he appears later this morning.


The only UK contribution to today's data-fest was GfK's latest assessment of consumer confidence. It was thoroughly unentertaining, stuck at -13 for a third successive month as analysts had predicted. Until London opened sterling was unchanged on the day but then it began to move higher, apparently helped along by the improved data from Euroland. It is 0.2% firmer against the USD.

The main event today will be the meeting of the opposition Labour Party's National Executive Committee, the body which collectively sets party policy. Its most important job today is to decide whether or not Labour's European election manifesto will include a commitment to hold a second referendum on whatever deal emerges from parliament. If it does, there could be some upside for the GBP.


As Japan enjoys the second of its six days of vacation and Akihito steps down as emperor the yen shows signs of firming against the USD. It is 0.3% higher on the day. There have been no Japanese economic data or news.

There is a degree of background concern that, with Tokyo closed for the week and yen liquidity at a low, some bad actor could cause a "flash crash", either on purpose or by accident. A sharp and illogical move, coming out of the blue, would not necessarily see any follow-through. 

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