EU Parliament Elections

In the wake of a light economic calendar today and an extended weekend ahead, currency markets are likely to remain subdued in the session ahead. At home, a string of positive economic data this week propelled the Pound towards the 1.69 level, only to be pulled back following yesterday’s revised first quarter GDP numbers. With signs of a potential housing bubble emerging, next week’s housing market reports will generate market interest for further hints. In the Euro zone, today’s dismal Ifo sentiment indices data has dampened market sentiment, with uncertainty over the outcome of elections in Europe further accentuating traders’ concerns. In the US, a slew of domestic macro releases next week will be eyed, especially after the relative calm this week.

Pound Sterling – UK Markets

The Pound was unable to hold on to its early session gains and moved lower against the US Dollar yesterday following the release of the revised first quarter domestic GDP report which failed to offer any upside surprise to investors. However, the GDP report did confirm that the domestic economic recovery remains on track and continued to build on its last year’s resurgence. Additionally, a larger than expected public sector borrowing in the UK further weakened investors’ sentiment towards Sterling yesterday. Meanwhile, a report from the CBI indicated that manufacturing sector in the nation continued to remain strong for May, with stronger growth expected in the coming months. With no domestic macroeconomic releases scheduled today, Sterling is trading in a tight range against its major counterparts. The Pound might take direction from economic releases across the Atlantic in the session ahead. Moving forward, in a holiday shortened week ahead, investors will keep a tab on the domestic consumer sentiment and crucial housing market reports for further direction. Additionally, global economic news flows will keep Sterling investors interested.

US Dollar – US Markets

The greenback gained against its major peers yesterday following release of healthy economic releases. The latest PMI data showed that manufacturing activity in the US expanded at the fastest pace in three months, while existing home sales rebounded for April, albeit at a slower than expected pace. In line with the historical data, the trend in claimants for jobless benefits remains volatile, as data showed that number of claimants for unemployment rebounded sharply from multi-year lows. Meanwhile, the San Francisco Fed President, John Williams, mentioned that the housing market is poised to recover in the coming months and added that the Fed is moving towards a “normal” monetary policy regime. The greenback is trading in a tight range against its peers today. Apart from new home sales data due later today, the greenback could witness some safe haven buying ahead of crucial elections in Europe. Meanwhile, durable goods orders data and the revised first quarter GDP report from the US scheduled next week is likely to offer a clearer picture of the trend in the US economy.

Euro – European Markets

The Euro continued to trade under pressure against its major peers in today’s trading session after data showed a larger than expected drop in the Ifo German business climate index for May. Meanwhile, the German GDP reading for the first quarter came in line with the preliminary estimate. Uncertainty over the outcome of the ongoing election in Europe might keep the Euro under pressure against the majors in today’s trading session. Apart from the European Parliament elections, traders are also likely to keep their focus on the Presidential election in Ukraine, given its influence on the geopolitical environment. The latest elections of the European Parliament has raised doubts over the sustainability of the Euro zone’s austerity regime. However, rating agencies have upgraded their sovereign debt rating on Spain and Greece, thus reflecting the improvement in the overall fiscal situation since the region’s debt crisis. In the midst of weak growth in the overall Euro zone economy, market participants will also monitor unemployment and retail sales data from Germany due next week for insights into the overall health of the region’s largest economy.

Other Currencies – Highlights

The Canadian Dollar maintained its yesterday’s gains against the US Dollar this morning ahead of the domestic consumer price inflation data scheduled later today. The Canadian Dollar had strengthened against its US counterpart yesterday, even though domestic retail sales showed a surprise decline for March largely on the back of weak car and clothing sales, highlighting that economic recovery in the nation remains under pressure. With the recent economic data suggesting a likely slowdown in domestic growth, investors will closely follow next week’s first quarter Canadian GDP report to get a clear picture about the same. Market participants will keep a tab on today’s domestic inflation report which is expected to show an accelerating trend in the nation at the beginning of the second quarter. With little on the domestic macro front next week until Friday’s GDP report, investors in the Canadian Dollar will closely monitor global macroeconomic cues for further direction.