UK Unemployment Rate Drops to 6.9%

With the UK unemployment rate falling below the 7% mark for February, calls for the BoE to raise interest rates sooner than later are likely to intensify, even though inflation continues to remain subdued. Against this backdrop, next week’s BoE minutes will provide insights about policymakers’ views about the domestic economy. Across the Atlantic, investors will eye today’s speech from the Fed Chief for her take on the economy and the future policy stance. In the Euro zone, today’s inflation report is expected to confirm the easing inflationary trend in the currency bloc and make things difficult for the ECB. However, better than expected first quarter GDP data in China has limited the downside in high yield currencies in today’s session.

Pound Sterling – UK Markets

The just out positive labour market report has lifted the Pound against its major counterparts and has briefly crossed the 1.68 mark against the greenback in today’s trading session. The unemployment rate dropped unexpectedly to 6.9% for February, while the number of people seeking jobless benefits in the nation also declined more than anticipated for March, thereby indicating that the nation’s labour market is on the recovery path. With no additional macro data for today, Sterling investors will keep a tab on a barrage of economic reports in the US for further direction to risk appetite. The Pound remained almost unchanged against its major peers yesterday. Data released earlier in the day revealed that the annual consumer price inflation in the nation eased to its lowest level in four and a half years for March due to lower fuel prices. The steadily easing price pressures indicate that the central bank is not likely to pursue tighter interest rates regime any time soon and will continue nurture the domestic economic recovery by keeping interest rates low.

US Dollar – US Markets

The greenback nudged marginally lower against its major peers in today’s trading session, as traders breathed a sigh of relief after data from China showed that the slowdown in growth for the first quarter was not as alarming as earlier feared. Meanwhile, the US Dollar traded in a tight range against most of its major counterparts in yesterday’s session following mixed set of domestic data. A weak manufacturing survey for New York pointed to sluggish economic momentum during the initial phase of the second quarter. Inflationary pressures remained benign, with the CPI hovering below the Fed’s target rate. Despite no major positive fillip from domestic economic indicators, the US Dollar managed to limit its losses, largely supported by increased safe haven buying on account of geopolitical tensions in Eastern Europe. The US Fed Chief, Janet Yellen, in her speech yesterday, did not discuss the US monetary policy, however, she might comment on it in her address to the New York Economic Club later today. Investors will keep a close watch on a slew of domestic macro reports including industrial production, housing market data along with the US Fed Beige Book survey for further direction.

Euro – European Markets

The uneven nature of recovery in Europe was once again highlighted yesterday, as data showed that German investors’ sentiment dropped for the fourth consecutive month for April, weighed down by persistent Ukraine conflict. However, current conditions view in Germany continued to improve to reach its highest level since July 2011 and Euro zone trade surplus climbed more than expected for February on the back of an increase in exports. Meanwhile, mixed set of macroeconomic reports released in the US lent some support to the common currency against the US Dollar in yesterday’s trading session. The Euro is trading on a firmer footing against most of its major counterparts this morning. With inflation data released earlier this month from most of the region’s peripheral economies confirming an easing trend, today’s Euro area inflation data is likely to have a similar inclination. However, as emphasised by the ECB Chief, Mario Draghi, in his comments earlier this month, the importance of Euro area inflation data for April, today’s report is unlikely to alter investors’ sentiment. Also, a barrage of macro data in the US will keep market participants interested.

Other Currencies – Highlights

The Kiwi Dollar continued its downward trend against the greenback in today’s trading session after domestic data released earlier indicated that the annual consumer price inflation unexpectedly eased during the first quarter of 2014. With subdued inflation in the nation, the Reserve Bank of New Zealand is unlikely to hike interest rates in its policy meeting scheduled next week. However, further losses in the Kiwi Dollar against the greenback was limited after data showed that China’s economy expanded more than expected during the first quarter of 2014. With no major domestic macro data due this week and in the forthcoming week, apart from the interest rate decision, markets will keenly watch some important US economic reports next week including Markit manufacturing activity and durable goods orders data for further cues. Meanwhile, today’s raft of US economic data will keep investors on their toes.