GfK Consumer Confidence on 9 Year High

Data released overnight revealed that GfK consumer confidence in the UK reached its highest level in nine years as the domestic economy and the labour market continued to recover at a steady pace. Against the backdrop of largely positive economic reports recently at home, next week’s PMIs figures will provide deeper insights into the pace of recovery in the nation. In Europe, the ECB is likely to announce accommodative policy measures in its policy meeting scheduled next week to combat low inflation and could prove decisive for currency markets. Across the Atlantic, next week’s non-farm payrolls data will offer a clearer view about the state of affairs in the current quarter following a sharp contraction in the economy during the first quarter.

Pound Sterling – UK Markets

Data released overnight indicated that GfK consumer confidence in the UK for May reached its highest level since April 2005, in sync with the recent rosy picture of the British economy. This has limited downside risks in the Pound against the majors in the session ahead. With no major decisive triggers at home today, a raft of US macroeconomic reports along with speeches from few Fed officials will keep the Pound-US Dollar pair investors interested. Against the backdrop of largely positive macroeconomic reports in the UK off late, next week’s PMI reports might validate the notion that the domestic economy is on the path of steady recovery. Apart from the PMI reports, the BoE monetary policy meeting scheduled next week will be closely watched for hints on the future policy stance. Additionally, in the wake of a surprise drop in BBA mortgage approvals this week, market participants will keenly watch next week’s housing sector prints for further insights into the health of the nation’s housing market.

US Dollar – US Markets

The US Dollar pared some of its previous session gains against the majors after the revised GDP numbers revealed that the US economy contracted more than estimated for the first quarter of 2014, partly weighted down by severe weather conditions. Additionally, weak pending home sales report further confounded market participants, given the mixed set of housing data released during the recent weeks. However, losses in the greenback were limited as investor sentiment remained subdued amid signs of escalating tensions in Eastern Europe. Moreover, the labour market report continued to show a steady recovery, as the number of people filing for jobless benefits dropped at a faster than expected pace last week and now is perched close to multi-year lows. The Fed officials, Esther George and Jeffrey Lacker, opined that the US central bank might need to start raising interest rates sooner than it expects. Against this backdrop, markets will keep a tab on a slew of macro reports along with speeches from some Fed officials for further direction to the US Dollar in today’s trading session. In the forthcoming week, domestic manufacturing and non-farm payrolls data will attract market attention in order to gauge the pace of recovery in the nation.

Euro – European Markets

The Euro is trading in a tight range against the greenback this morning. Data released earlier today indicated that Spanish consumer price inflation eased for May and Italian inflation report due later today is likely to show a similar trend which might have a bearing on the next week’s Euro zone inflation report. With market participants bracing for the ECB to unveil fresh monetary stimulus in its next week’s policy meeting, these disappointing numbers are only likely to add pressure on the ECB to unveil unconventional measures in its meeting. Meanwhile, another report revealed that German annual retail sales rose more than expected for April. Additionally, next week’s final manufacturing and services activity report from European economies along with the final Euro zone GDP numbers will attract modest market attention. The single currency limited losses against the US Dollar yesterday after data indicated that US economic growth contracted at a faster than expected during the first quarter of 2014.

Other Currencies – Highlights

The Canadian Dollar is trading range bound against the greenback in today’s trading session. Markets will keep a close watch on the domestic GDP report which is likely to show that growth slowed during the first quarter of 2014, partly contributed by harsh weather conditions prevalent in the region. The Canadian Dollar advanced against most of its major peers yesterday after data indicated that Canadian current account deficit narrowed more than expected during first quarter on the back of strong exports. Additionally, weak US GDP numbers and pending homes sales data further supported gains in the Canadian Dollar. Going forward today, markets will keep a tab on a slew of macro data in the US along with speeches from some Fed officials for further direction. In the forthcoming week, crucial domestic data, especially the monetary policy meeting along with labour and housing market reports, will keep investors on their toes.