Friday Focus on US Consumption

As the weekly session draws to an end market attention is likely to shift to the US, with today’s retail sales and Reuters/Michigan consumer sentiment data set to assist in seeking a broader perspective surrounding US economic growth. Additionally, investors await the start of a two-day meeting of Eurozone finance ministers aimed at finalising the Cypriot bailout deal. With no major economic indicators from the UK scheduled today, traders brace for a flurry of economic data over next week. The labour market report and BoE minutes will remain top events to watch for in the coming week. Moreover, CPI data will paint a precise picture regarding price pressures in the economy.

Pound Sterling – UK Markets

The Pound has strengthened against the Euro this morning, as investors remain cautious ahead of the European finance ministers meeting commencing later today. Additionally, expectation of disappointing Eurozone industrial production data later in the day has also prompted traders to shun the Euro and move towards Sterling. Apart from the Conference Board’s leading economic index scheduled for release today, there is nothing much on the economic calendar to influence the direction of the Pound. With a relatively lacklustre week coming to end, a slew of important economic releases due next week will likely prove decisive for the Pound in the near term. Employment and retail sales data for March are likely to shed light over the direction of the UK economy during the first quarter. With inflationary pressures being a major drag on the BoE’s monetary policies and the nation’s economic growth, consumer price inflation data should remain a key event on traders’ radar. Moreover, minutes of the BoE’s latest monetary meeting also feature in next week’s economic calendar.

US Dollar – US Markets

The greenback is trading marginally higher against the Euro and the Pound in today’s trading session, ahead of retail sales and Reuters/Michigan consumer confidence data due later today. With recent manufacturing and labour data falling below consensus estimates, today’s retail sales data is also likely to replicate the weak trend observed in other segments. Moreover, the consumer confidence index will offer a clearer indication of consumer morale in the aftermath of the recent sequester cuts. Yesterday’s initial jobless claims data came as a breather, as data revealed that the number of Americans applying for jobless benefits fell more than expected, thereby easing fears of a deterioration in labour market outlook. However, further evidence of a pickup in employment will be warranted in order to conclude that yesterday’s report was not an aberration. Against this backdrop the Fed Chief, Ben Bernanke’s speech later today will be deciphered regarding his views on the jobs markets and could prove decisive for the direction of the US Dollar against the majors.

Euro – European Markets

Strong Italian long term bond auctions improved risk appetite among investors, driving European equity markets higher and leading the single currency to nudge above the 1.31 mark against the greenback in yesterday’s trading session. Italy witnessed a drop in borrowing costs at its longer dated bond auctions held yesterday, as monetary easing by Japan prompted traders to shrug off ongoing political impasse in the nation and search for higher returns. However, the common currency has come off yesterday’s high and weakened against the US Dollar in today’s trading session. Meanwhile, with recent industrial figures across Europe providing mixed results, markets will keenly watch today’s Eurozone industrial production data for further clarity on the region’s economic outlook. Additionally, in the Euro-area finance ministers two-day meeting in Dublin starting later today, the messy bailout of Cyprus is likely to find its way into the discussion. Additionally, the agenda is also likely to focus on whether to give Ireland and Portugal an extension to their bailout loan repayments.

Other Currencies – Highlights

The Kiwi Dollar has lost steam against its US counterpart in today’s trading session, as investors remain on tenterhooks ahead of a slew of important economic releases in the US and Eurozone. Meanwhile, data out yesterday showed that food prices in New Zealand for March recorded its biggest monthly drop since October 2011. In this context, consumer prices for the first quarter of 2013, due next week, will be eyed for insights into the nation’s inflation outlook. Additionally, with data revealing a deterioration in manufacturing activity earlier this week, markets are expected to keep a tab on services PMI, due next week, for a clearer picture surounding overall growth in the nation’s economy.