US Jobless Claims Later Today

Yesterday’s unexpectedly weak US macroeconomic data is likely to somewhat dampen recent optimism surrounding the US economic recovery, especially in the wake of a continued deterioration in the nation’s housing sector. Later today, durable goods orders and jobless claims data will drive trading sentiment in currency markets. In the Euro zone, following yesterday’s encouraging PMI data, the Ifo German business sentiment data released earlier today has also showed an improvement. Against this backdrop, a speech from the ECB President is expected to gain considerable market attention in the session ahead. At home, in the midst of a relatively light economic calendar today, market participants are looking forward to tomorrow’s retail sales data for further direction.

Pound Sterling – UK Markets

On expected lines, the BoE minutes indicated that policymakers voted unanimously in favour of maintaining the key interest rate at record low levels of 0.5% at its latest policy meeting and the asset purchases steady at £375 billion. Meanwhile, the minutes revealed that policymakers were divided over the amount of slack in the economy and the outlook for inflation in the medium-term. The Pound slid against the Euro in yesterday’s session following upbeat PMI data from Germany and the Euro zone. However, the CBI survey showed that business optimism among UK manufacturers rose sharply for April, helped by strong growth in orders at home and abroad. Additionally, the Chancellor’s plans to rein in deficit is yielding results as yesterday’s public finances data showed that Britain met its fiscal year 2013-14 borrowing target and managed to curtail its budget deficit at the lowest level since the financial crisis in 2009. Sterling is trading in a tight range against the greenback this morning. With lack of decisive domestic triggers today, the Pound is likely to move in accordance with US durable goods orders and weekly jobless claims figures due later in the day. Also, tomorrow’s UK retail sales will be keenly eyed which is expected to show a monthly decline for March.

US Dollar – US Markets

The US Markit manufacturing report indicated that factory output expanded at its fastest pace in three years for April, though the rate of growth came in slightly lower than expected, weighed down by a decline in inventories. Meanwhile, the new home sales figures dropped to its lowest level in eight months for March, pressured by rising house prices and mortgage rates. The recent disappointing housing sector reports have raised fears that the domestic housing market is witnessing turbulence despite signs of a modest pick-up in the overall economic activity. These mostly downbeat numbers failed to provide any direction to the US Dollar yesterday. Earlier in the session, the greenback dropped against the Euro as data indicated that the Euro zone and German manufacturing and services activity expanded more than anticipated for April. Meanwhile, the greenback is trading in a tight range, albeit on a weaker footing, against most of its major counterparts in today’s trading session. The US durable goods orders along with initial jobless claims data due later today will keep market participants on their toes. Also, investors will keep a close watch on the ECB President, Mario Draghi’s speech scheduled later in the session.

Euro – European Markets

The common currency advanced against its major peers yesterday after data indicated that the Euro zone and German manufacturing and services activity expanded at a faster pace for April, though the French manufacturing and services activity slowed more than expected. The mixed readings continue to highlight that the Euro area’s recovery still remains uneven thereby limiting the gains in the Euro. The single currency is trading range bound, albeit on a firmer footing against the major currency pairs in today’s trading session after data released earlier today indicated that the German business climate and expectations unexpectedly ticked higher. However, the current situation reversed its previous trend and came in lower than expected for April. Meanwhile, markets keenly await speeches from few of the ECB officials along with its President, Mario Draghi’s comments for further hints over the central bank’s monetary policy outlook and its forward guidance. Also, today’s US durable goods orders and jobless claims reports will have potential to alter investors’ risk sentiment.

Other Currencies – Highlights

The Kiwi Dollar has pared most of its early session gains, but is trading on a marginally firmer footing against its major counterparts this morning. Earlier today, the Reserve Bank of New Zealand raised its key interest rate to 3.00% from 2.75%. While the hike in interest rates was on expected lines, the RBNZ Governor, Graeme Wheeler, stated that the pace of future interest rate hikes will be depend on domestic economic data and the central bank’s assessment of inflation, further adding that inflationary pressures in the nation are increasing. The RBNZ also indicated that the New Zealand economy expanded by 3.5% in the year ended March 2014, slightly above the central bank’s earlier estimate of a 3.3% growth rate. With no domestic economic data scheduled for release for the rest of the week, investors in the Kiwi Dollar will keep a tab on crucial global macro releases for further direction to risk appetite. Looking forward, important domestic economic reports scheduled next week will prove crucial for the Kiwi Dollar against the majors.