UK Industrial Production Improves

On the back of strong manufacturing activity in the UK, just released data has revealed that industrial production improved further for April. However, the probable timing of the BoE’s interest rate hike still remains a question as inflation and the housing market continue to pose a threat to steady recovery in the nation. Against this backdrop, today’s NIESR GDP estimate will attract market attention for further hints to the overall health of the economy. In Europe, on the back of today’s mixed industrial production data in France and Italy, this week’s Euro zone industrial production figures will garner increased market attention. Across the Atlantic, most US policymakers remain sceptical over the probable timing of an interest rate hike in the nation.

Pound Sterling – UK Markets

Sterling is trading in a tight range, albeit on a firmer footing, against the US Dollar after data just released indicated that industrial and manufacturing output in the UK accelerated for April, on the back of continued expansion in the domestic manufacturing sector. Mostly encouraging economic releases in the UK recently have bolstered hopes that some BoE policymakers might show their support for a sooner than expected rate hike, although this would be more evident in the minutes of the BoE’s latest policy meeting scheduled later this month. Meanwhile Ian McCafferty, a BoE policymaker, echoed a similar tone and supported an early interest rate hike. However, the probable timing for raising the benchmark interest rate continues to remain a matter of debate, as inflation and the housing market still remain a concern. Meanwhile, today’s NIESR GDP estimate will attract market attention for further direction. With no major decisive triggers in the UK and the US yesterday, Sterling strengthened versus the common currency after a report indicated that Euro zone Sentix consumer confidence dropped unexpectedly for June.

US Dollar – US Markets

The greenback registered gains against the common currency in yesterday’s trading session after data released in the Euro zone indicated that investor sentiment dropped unexpectedly for the second straight month for June. Against the backdrop of a light macro calendar in the US yesterday, mixed comments from US Fed officials held gains in the US Dollar against the single currency. James Bullard, a Fed official, adopted a hawkish stance and opined that the US central bank has moved much closer to its macroeconomic goals, while the Fed kept its current accommodative monetary policy on hold. However, another US Fed official, Eric S. Rosengren, indicated that the central bank should refrain from raising the benchmark interest rate until the nation’s economy is “within one year” of reaching its twin goals of full employment and 2% annual inflation. Meanwhile, the greenback is trading in a tight range against its major counterparts this morning. In the absence of decisive economic triggers in the US today, investors will keep a tab on the NFIB small business optimism report which is expected to show an improvement for May.

Euro – European Markets

The common currency dropped against the US Dollar and moved below the 1.36 mark in yesterday’s trading session following a weak Euro zone consumer confidence report. Data from Sentix showed that consumer sentiment dropped unexpectedly for the second consecutive month for June to the lowest since December 2013, as market participants continued to evaluate the implications of last week’s extraordinary move by the ECB to slash the benchmark interest rate, while lowering its deposit rate into negative territory for the first time. Additionally, investors continued to assess whether a series of stimulus measures will be sufficient to boost the Euro zone economic recovery and stop inflation from falling further. The single currency has limited further losses and is range bound against its major counterparts in today’s trading session. Data released earlier showed mixed industrial production readings in France and Italy, limiting any upside in the common currency. The below par industrial production data in France has raised concerns among market participants ahead of Thursday’s Euro zone industrial production report.

Other Currencies – Highlights

The Swiss Franc dropped against the US Dollar this morning following soft domestic labour market and retail sales numbers. Data released earlier today indicated that the Swiss unemployment rate remained unexpectedly steady at 3.2% for May, against market expectations for a drop to 3%. Earlier last month, Swiss voters rejected a referendum to double the nation’s minimum wage rate which, if accepted, would have weighed on the prospects of small and medium sized businesses. Furthermore, retail sales in Switzerland grew at a much slower than expected pace for April, further weighing on the performance of the Swiss Franc. With no major domestic economic releases scheduled this week, market participants will look forward to cues from the US for further direction, especially this week’s retail sales and Reuters/Michigan consumer sentiment data.