European Economic Recovery Mixed Reports

In line with the trend lately, this week’s BoE monetary policy meeting is likely to remain a low key affair. Further, crucial domestic macro releases due later this week will help investors to gauge the overall strength of the economy during the first quarter of the year. In the Euro zone, economic recovery continues to remain uneven and today’s positive German industrial production data and a weaker than expected Euro zone investors’ confidence report will only add to investors’ confusion. Meanwhile, the World Bank trimmed China’s growth forecast for 2014, citing economic weakness during the early phase of 2014. With little of note on the global macro front to drive risk sentiment today, speeches from ECB and Fed policymakers will attract market attention.

Pound Sterling – UK Markets

The Pound searched for direction against the greenback in Friday’s trading session. Data revealed that although Halifax monthly house prices in the UK unexpectedly dropped for March, it registered an annual pace of growth mainly due to a rise in employment, higher consumer confidence and low interest rates. Separately, the US non-farm payrolls report, which was expected to be a major market mover, revealed that US employers added marginally less than expected jobs for March and proved to be a non-event for Sterling investors. However, the pace of job additions suggested that the recent data has started to overcome the winter related weakness in the economy. Sterling is trading in a tight range against the US Dollar in today’s trading session. With lack of decisive triggers in the UK, markets will closely monitor the BoE monetary policy meeting later in the week. Though the central bank is likely to hold its policy stance unchanged, any comments from the BoE Governor, Mark Carney, has the potential to alter risk sentiment. In the wake of the recent weak PMI data in the UK, industrial production and trade balance data scheduled for release during this week will also be keenly eyed for further cues.

US Dollar – US Markets

The US Dollar was pretty volatile against the Euro on Friday following the release of marginally weaker than expected domestic employment data. The labour market report showed that US employers added 192,000 jobs for March, slightly less than market expectations for an addition of 200,000 jobs. The unemployment rate remained unchanged at 6.7%. The muted reaction in currency markets to Friday’s data possibly highlights that the data is unlikely to have any major impact on the Fed’s plan to taper asset purchases in the future, especially amid clear signs that the US economic growth is recovering from weather induced weakness in the initial phase of the first quarter. Meanwhile, the US Dollar is trading in a tight range against its major counterparts this morning. With a light domestic macroeconomic calendar today, markets will keep a close watch on the minutes of the US Fed’s latest policy meeting along with speeches from some US Fed officials scheduled later this week to get a clearer picture of their views on the timing for abandoning the central bank’s accommodative measures. Also, towards the end of the week, the Reuters/Michigan consumer sentiment report for April will be eyed for further direction.

Euro – European Markets

After trading in a tight range against the majors on Friday, the single currency managed to eke out minor gains against its major peers this morning after the Sentix report just out revealed that Euro zone’s investor confidence improved for April, though less than expected. However, prevalent threat of the region sliding into deflation will continue to prompt traders to take note of the underlying prospect of the ECB adopting unconventional policy measures in the future. Against this backdrop, traders will remain wary of any possible surprises from the French and German inflation figures during the week. Besides, media reports also indicated that the ECB ran a simulated test to assess the impact of asset purchases for countering deflationary pressures. Meanwhile, date released earlier today also showed that German industrial production increased more than anticipated for February, thus pointing that recovery is somewhat gaining momentum in the region’s largest economy. Later in today’s session, markets will keep a tab on comments from ECB policymakers in order to ascertain their views on deflationary pressures in the common currency union.

Other Currencies – Highlights

The Swiss Franc advanced marginally against the US Dollar in today’s trading session after data released indicated that monthly consumer prices in Switzerland unexpectedly remained flat for March. The inflation numbers thus provided some relief to the Swiss National Bank policymakers as it indicated that the Swiss economy rebounded from deflationary pressures. With lack of major economic data later today, investors will keep a tab on tomorrow’s unemployment data which is likely to show that the seasonally adjusted rate remained unchanged for March. Along with the unemployment data, retail sales report will also attract market attention and is expected to show a faster pace of increase for February. Additionally, some important reports in the US including minutes from the Fed’s latest policy meeting along with the Reuters/Michigan consumer confidence report will keep investors in the Swiss Franc on their toes.