Upbeat US Macroeconomic Reports

Data released yesterday revealed that UK mortgage approvals dropped for April which is likely to calm recent market fears of a potential housing market bubble in the nation. Against this backdrop, investors will focus on tomorrow’s UK consumer confidence report for further direction. In the US, yesterday’s upbeat macro data has boosted expectations that the Fed might continue to taper its bond purchases going forward. Across Europe, data released earlier today indicated that the number of unemployed people in Germany unexpectedly rose for May, making things a little trickier for the ECB ahead of its policy meeting scheduled next week. Going forward today, markets will keep a close eye on Euro zone sentiment indices which are likely to be largely encouraging for May.

Pound Sterling – UK Markets

Sterling traded under pressure against the majors yesterday following the release of disappointing UK housing market data. The BBA mortgage approvals dropped to the lowest level in eight months for April, following tighter lending rules to control the overheating market. The weak mortgage approvals data is likely to allay recent fears of a potential housing market bubble in the nation. Additionally, upbeat US macroeconomic data pressurised the Pound against the US Dollar. Meanwhile, the BoE Governor, Mark Carney, extended support to the radical views of the UK Independence Party that the European free market might be posing a threat to the nation’s financial stability. In today’s trading session, the Pound is trading lower against the US Dollar. With a light domestic macro calendar today, investors will keep a tab on the UK distributive trades survey which will provide an insight into the retail activity for May and could alter risk appetite of Sterling investors. The numbers are likely to provide the first insights into the health of the retail sector for May ahead of the BRC and official retail numbers due next month. Additionally, markets will eye tomorrow’s domestic GfK consumer confidence report for further direction.

US Dollar – US Markets

The greenback advanced against most of the majors yesterday following upbeat US macroeconomic reports which suggested that the US economy is gaining traction during the second quarter of 2014. Durable goods orders unexpectedly rose for April, on the back of an increased demand for military aircrafts. Furthermore, house prices in the US advanced more than expected for March, although at a slower pace, highlighting that US housing market recovery began to gather momentum at the end of the first quarter. Additionally, consumer confidence in the nation improved as expected for May. These positive reports are likely to support the US Fed’s decision to continue winding down its monetary stimulus measures. The US Dollar is trading on a firmer footing against the Euro and Pound in today’s trading session. With no major decisive triggers in the US today, investors in Euro-US Dollar pair will keep a tab on Euro zone sentiment indices for May. Additionally, market participants will eye tomorrow’s US GDP numbers which are likely to be revised lower for the first quarter, while jobless claims data is likely to strengthen views that the labour market continues to recover.

Euro – European Markets

Data released earlier today indicated that the number of unemployed people in Germany unexpectedly increased, while the unemployment rate remained unchanged for May. However, the Euro showed little reaction to the German labour market data and continued to trade in a tight range against most of its major counterparts this morning. Going forward, market participants will keep a tab on the Euro zone sentiment indices which is expected to remain firm for May. Separately, the newly elected Ukrainian President promised to step up operations to rein in separatists in the eastern part of the country, which could possibly escalate tensions in Eastern Europe. The single currency dropped against the US Dollar yesterday following dovish comments from the ECB President and upbeat macroeconomic data in the US. The ECB Chief, Mario Draghi, once again assured investors that the central bank will do everything feasible within their mandate to counter deflationary pressures and boost recovery in the Euro area. However, the Euro edged higher against the Pound yesterday as data indicated that BBA mortgage approvals in the UK fell to the lowest level in eight months for April.

Other Currencies – Highlights

The New Zealand Dollar is trading lower against the US Dollar in today’s trading session following downbeat domestic business confidence data. Data showed that a net 53.5% of respondents anticipate general business conditions in New Zealand to improve over the next 12 months, down from 64.8% respondents posted for April. Separately, Fonterra Co-operative Group, the world's largest dairy exporter, reduced its payout to dairy farmers for this season and the next. Additionally, better than expected macro data released in the US yesterday continued to add pressure on the New Zealand Dollar against the majors. With no major domestic macro data scheduled later in the day, markets will keep a close watch on tomorrow’s GDP revision and pending home sales data in the US for further direction.