Across the Atlantic, the first quarter GDP numbers released on Friday disappointed market participants, fuelling speculation of QE3 in the future. However, positive consumer confidence data provided some respite to traders. A few regional manufacturing indices due today will be closely watched for gauging the strength of the recovery in the second quarter. Looking towards Europe, the debt crisis in the region seems to be taking its toll on peripheral economies, with Spain entering into a recession in the first quarter.
In the UK house prices, as reported by Rightmove, have surprised on the upside earlier today, providing support to Sterling against the majors.
Pound Sterling – UK Markets
Despite concerns over the fragile state of the UK economy, the Pound continued to be in favour versus the Euro on Friday, after S&P downgraded Spain’s credit rating by two notches. Moreover, dismal US GDP data led the currency to gain against the US Dollar as well.
Yesterday, David Cameron warned that the downturn in the UK economy would continue for years and partly blamed the Eurozone crisis for dragging the nation into a double-dip recession.
The currency continued to trade on a firmer footing against the majors this morning following a survey by Hometrack, which revealed that house prices in the UK climbed for the second consecutive month for April. Additionally, data indicating that Spain slipped into recession and weaker than expected growth in German retail sales for March, supported gains in the Pound against the Euro.
With no other macro trigger for the day this week’s PMI numbers, as well as consumer credit and house prices data, will set the tone for the BoE’s monetary policy decision on 10 May 2012.
US Dollar – US Markets
On Friday, the US Dollar slipped further against its peers after data revealed that the US economy grew at 2.2% for the first quarter, marking a sharp fall from the previous quarter’s 3% growth and lower than market expectations of a 2.5% rise. The weaker than expected growth has once again revived talks for an additional round of easing. However, losses in the US Dollar were capped after data revealed that consumer sentiment in the US climbed to the highest level in more than a year.
In a move to restore market confidence, San Francisco Fed President, John Williams, opined that he is more optimistic about the US economy and does not see the need for further easing at the moment.
In today’s trading session the US Dollar has moved marginally higher against the Euro, after data revealed that the Spanish GDP continued to contract for the first quarter and fuelled risk aversion among investors.
On the back of upbeat consumer morale, data slated for release today is expected to reveal that consumer spending in the US climbed for March. Among other releases for today, indicators related to regional manufacturing in the US will be closely tracked for hints about the trend in manufacturing activity for April.
Euro – European Markets
The Euro was under pressure against the majors during the early session on Friday, after S&P alarmed markets by lowering its long term credit rating for Spain by two notches.
The Euro has retreated against both the Pound and the US Dollar this morning as disappointing economic indicators from the Eurozone have dampened appeal for the unified currency and reignited worries over the sovereign debt crisis. Earlier in the day, data indicated that the Spanish economy slipped into a recession for the first quarter, while German retail sales fell short of market estimates. Additionally, rating downgrades of a large number of Spanish banks by the S&P spooked investors.
In today’s trading session, markets are keeping an eye on the outcome of the French bills auction due later today. Additionally, traders should keep a tab on the ECB’s monetary policy meeting scheduled later this week, wherein the central bank is expected to leave its benchmark interest rate unchanged at current levels.
Other Currencies – Highlights
The Kiwi Dollar has declined against the greenback this morning after data revealed that New Zealand’s trade surplus unexpectedly narrowed for March, following lower than expected increases in exports coupled with a higher than expected jump in imports. Additionally, data indicated that the nation’s M3 money supply growth slowed for March, while the nation’s activity outlook indicator deteriorated for April.
Weak economic indicators from the Eurozone also weighed on the Kiwi Dollar, as worries over Spain’s fiscal situation re-emerged after data indicated that Spain slipped into a recession and the nation’s unemployment rate remained at elevated levels.
However, losses in the Kiwi Dollar were capped as the National Bank of New Zealand revealed an improvement in the nation’s business confidence for April.
British Pound Suffers Losses Ahead of Tuesday's Critical Vote