Sterling Staying Strong After Bank Holiday Weekend

In the wake of an extended weekend in Europe, trading in currency markets remained rather lacklustre yesterday. Against this backdrop, some crucial US and the Euro zone macro releases will attract market interest today and in the week ahead. Further, developments in Eastern Europe will influence risk sentiment today, especially amid increasing signs of the failure of an accord between Russia and the West to ease tensions in Ukraine. At home, the minutes of the BoE’s latest monetary policy meeting scheduled for release tomorrow will be closely eyed by market participants to gauge policymakers’ views on the steadily improving economic environment in the nation and for possible cues about an interest rate hike.

Pound Sterling – UK Markets

The Pound traded higher against most of its major counterparts yesterday in a holiday thin trading session as markets in London remained closed on account of Easter. The encouraging initial jobless claims and Philadelphia manufacturing activity data released on Thursday added pressure on Sterling against the US Dollar but found support from domestic data released last week revealing that the unemployment rate dropped more than market expectations and below the BoE’s benchmark target. Additionally, dovish comments from the US Fed Chief last week stating that the central bank would maintain low interest rates to boost recovery added to gains in the Pound against the US Dollar. Meanwhile, Sterling is trading on a firmer footing against the greenback this morning. With lack of decisive triggers in the UK, markets will keep a tab on existing home sales and Richmond region manufacturing data in the US for further direction ahead of tomorrow’s minutes from the BoE’s latest monetary policy meeting alongside public finance numbers.

US Dollar – US Markets

In a subdued trading session on account of a holiday in Europe for Easter Monday, the US Dollar continued to trade on a firmer footing against the single currency yesterday after data released last week indicated that number of people claiming jobless benefits rose marginally but continued to hover close to a seven-year low, thereby showing signs of a strengthening domestic labour market. Additionally, the Philadelphia region manufacturing activity expanded at a faster than expected pace for April, helped mainly by an improvement in new factory orders and shipments. However, last week’s dovish comments from the US Fed Chief, Janet Yellen and yesterday’s report indicating a slowdown in the Chicago region manufacturing activity for March capped gains in the greenback against the Euro. The US Dollar is trading in a tight range against most the majors in today’s trading session. In the aftermath of last week’s downbeat housing sector data, today’s existing home sales figures will be eyed to gauge whether the slowdown in the US housing market is a temporary phenomenon. Additionally, Ben Bernanke, the former Fed Chairman’s speech scheduled later today is likely to attract modest market attention.

Euro – European Markets

In a quiet trading session in currency markets yesterday, the common currency moved lower against the US Dollar, as encouraging US initial jobless claims and Philadelphia region manufacturing activity reports released on Thursday lent support to the greenback. However, data released last week indicated that Italian monthly industrial orders and sales dropped for February as both foreign and domestic demand deteriorated, thus indicating that economic recovery remains uneven in the Euro zone’s third largest economy. The Euro is trading in a tight range against most of its major peers this morning. The Euro-US Dollar pair is likely to chart movement in accordance with today’s Euro area consumer confidence data which is expected to remain unchanged for April. Additionally, tomorrow’s regional and national preliminary manufacturing activity reports along with Mario Draghi, the ECB President’s speech and German Ifo sentiment indices later in the week will attract most of market interest for further direction to risk appetite. Furthermore, investors will keep a track of developments in Eastern Europe.

Other Currencies – Highlights

The Japanese Yen reversed its previous session losses and advanced against the US Dollar this morning. Data released yesterday revealed that the domestic trade deficit widened more than anticipated for March, as export growth slowed while energy imports continued to rise. However, last week’s upbeat initial jobless claims report along with better than expected Philadelphia region manufacturing activity numbers overshadowed a slowdown in Chicago region manufacturing activity, thereby supporting gains in the US Dollar against the Japanese Yen yesterday. With no major macro data in Japan scheduled for the entire week, except for consumer price inflation figures, investors will closely watch a set of housing and manufacturing sector reports along with durable goods orders data in the US scheduled this week for further direction.