UK Economic Growth Remains Strong

The just out British growth numbers for the final quarter of last year has confirmed that the nation’s economic recovery indeed picked up steam in 2013. Given the BoE’s continued efforts to support the domestic economic recovery, macro data in the coming months will give further insights about whether the economy can sustain its upward growth trajectory. Across the Atlantic, economic recovery continues to gain momentum following last month’s rough weather conditions and despite the Fed slowly withdrawing its massive asset purchases programme over the past few months. In the Euro zone, today’s German inflation report will gain maximum market attention and a downside surprise on this front will boost the ECB’s resolve to introduce additional stimulus measures.

Pound Sterling – UK Markets

The just released domestic final fourth quarter GDP report has failed to surprise market participants and has induced little movement in the Pound against the majors this morning. However, with the recent UK economic data pointing towards a broad-based recovery across different sectors and the BoE pledging to persist with its current stance on interest rates, expectations that the British economy will continue to gain traction this year will certainly be boosted. With little on the domestic macro front for the rest of the day, Sterling investors will closely eye global economic data for further direction today. The Pound climbed against its peers yesterday following the release of better than expected domestic retail sales numbers for February which highlighted the continued strength of the UK economy. Today’s release of the buoyant UK GfK consumer sentiment report further validated this point as consumer confidence in the nation for March climbed to the highest level since August 2007. In the forthcoming week, crucial domestic macroeconomic data, including manufacturing and services PMI and a spate of housing market reports will prove crucial for the Pound against the majors.

US Dollar – US Markets

Buoyed by the better than earlier estimated domestic fourth quarter growth numbers, the US Dollar strengthened against the common currency yesterday. Although the revised GDP numbers fell short of market expectations, the pick-up in consumer spending during the quarter bodes well for the nation’s prospects this year. Furthermore, the number of people claiming first time unemployment benefits fell unexpectedly last week, hinting that recovery is underway in the labour market, following last month’s dismal numbers due to severe weather conditions. Meanwhile, the Senate has overwhelmingly passed a bill approving $1 billion in aid for Ukraine. The greenback is trading on a firmer footing against the single currency in today’s trading session. Earlier today, the Chicago Fed President, Charles Evans, opined that the central bank might have to maintain interest rates at the present record low levels until late 2015. Later today, investors will follow the Reuters/Michigan consumer sentiment report and the personal consumption expenditure reports for further direction. Moving forward, next week’s slew of domestic economic data will keep investors on their toes.

Euro – European Markets

Despite the absence of major domestic economic data, the common currency weakened against the majors yesterday, tracking upbeat global macroeconomic reports. Additionally, the single currency continues to remain influenced by the dovish stance adopted by Mario Draghi and Jens Weidmann earlier this week. Against this backdrop and with today’s German inflation report expected to show further easing in the nation’s consumer prices for March, the Euro is likely to remain under pressure during the rest of the session. Additionally, the Euro zone consumer and business sentiment reports and further developments in Ukraine will generate market interest today. The Euro has continued to weaken against the greenback this morning following the release of downbeat French and Spanish economic data earlier today. While consumer spending in France rose at a slower than expected pace for February, consumer prices in Spain unexpectedly declined for March, providing further proof of an uneven economic recovery in the currency bloc. Looking forward, Euro investors will have their plates full in terms of domestic economic releases, with the Euro zone inflation report expected to hog most of the limelight.

Other Currencies – Highlights

The Japanese Yen is trading in a tight range against the US Dollar in today’s trading session even though data released earlier today showed that the annual consumer price inflation in the nation rose as expected for February, inching closer towards the Bank of Japan’s 2% target. Additionally, the unemployment rate in the nation fell unexpectedly to 3.6%, while retail sales rose more than market expectations for February, suggesting an overall improvement in the Japanese economy. However, with next month’s sales tax hike looming large, it remains to be seen if the nation’s economic recovery continues to gain foothold without the BoJ’s further intervention. In the absence of domestic economic data today, investors in the Japanese Yen will keep a tab on important news flows emanating from both sides of the Atlantic for further direction. Looking ahead, next week’s domestic manufacturing and housing market data will keep investors in the Japanese Yen interested.