BoE to Stay Put

The plight of the UK appears to be improving as as data just released has shown that manufacturing production grew more than expected for March. Following recent upbeat PMI and GDP releases, the BoE is not expected to pursue aggressive easing measures in its policy meeting later today, unlike its major global counterparts. Today’s NEISR GDP estimates will also prove crucial in determining the near term trend of Sterling. German industrial production data surprised investors on the upside yesterday and provided support to the Euro. With risk appetite remaining firm, as evidenced with the rally in US equity markets, today’s jobless claims data will be closely watched.

Pound Sterling – UK Markets

Buoyant German industrial production data led Sterling to nudge lower against the Euro in early trading yesterday. However the Pound recovered some of its losses against the common currency in the latter half of the session. Figures just out have revealed that industrial activity for March surpassed market estimates allowing the Pound to move higher against the majors this morning. The BoE monetary policy meeting later today will be closely watched. With April’s PMI figures offering a suggestion that a recovery is taking effect and with the central bank extending its FLS scheme last month, the BoE is unlikely to follow the footsteps of major global central banks in pursuing aggressive stimulus measures. However, the leadership transition in the coming months could hold the key in deciding the BoE’s policy stance during the course of the year. Apart from the BoE meeting today, the NEISR GDP estimate also features on the economic calendar. With the UK economy dodging a triple dip recession in the first quarter, today’s numbers for April will provide some insights on the second quarter performance.

US Dollar – US Markets

The US Dollar was once again influenced by events unfolding in overseas markets yesterday due to a lack of definitive news on the domestic front. The greenback lost steam against the single currency after German industrial output unexpectedly rose for March, leading to a rise in demand for high yield currencies. With traders remaining on the sidelines, the US Dollar is trading range bound against the Euro in today’s session. With last week’s initial jobless claims data surprising on the upside, traders will keenly await today’s numbers to gauge whether the upward trend continued last week. Moreover, with figures arriving just a week after the upbeat non-farm payrolls report, volatility in the US Dollar in today’s trading session cannot be ruled out. Meanwhile, the Dallas Fed President, Richard Fisher, indicated that fiscal uncertainty is proving to be a major drag on the economy. In this context, comments from Fed officials later today are expected to hog the limelight.

Euro – European Markets

An unexpected rise in German industrial production helped the single currency to gain further traction against the US Dollar in yesterday’s trading session. The data has come out of the blue, as figures revealed that the nation registered buoyant industrial activity for March underpinned by strong export demand. However, it will be too early to call it a sign of recovery, considering weak PMI figures released last week. Moreover, with the broader Eurozone economy registering lacklustre growth and the ECB recently embarking on further easing, the upside for the single currency in the near term looks limited. Meanwhile, as fundamentals for the Euro-area remain clouded in uncertainty the ECB, in its monthly report, has reiterated that although the economic outlook for the region continues to be on the downside, the recent rate cut should support prospects of a recovery later in the year. On account of a light European economic calendar today, developments taking place in overseas markets are likely to prove decisive for the trend of the single currency. Additionally, German trades balance data due tomorrow will likely garner market attention.

Other Currencies – Highlights

The Australian Dollar has taken strides forward against its US counterpart this morning after data released earlier today revealed that the jobless rate in Australia unexpectedly dropped for April, adding to signs that the nation is treading the path of recovery. The Reserve Bank of Australia on Tuesday cut its key interest rate to boost the economy. In this context, housing and business confidence data due next week will be keenly watched for further insights into the nation’s recovery. Meanwhile, data released today has indicated that Chinese consumer price inflation climbed more than expected for April, making it difficult for the People's Bank of China to pursue a loose policy stance. Meanwhile, with a relatively quiet economic calendar today, markets are expected to keep a tab on the US initial jobless claims data due later today for further cues to risk appetite. Going forward, a slew of key economic releases from China due next week are likely to gain market attention, considering its influence on the Aussie Dollar.