What’s been happening?

Pound Sterling – UK Markets 

Friday morning saw pound sterling moving lower, as traders prepared for the latest UK GDP data release. This was expected to show economic growth being challenged by bad weather during the first quarter of 2018. As data came in with lower than expected figures for both the quarter and year, the pound moved to its lowest level against the USD since 9th March. The fragile data, in the form of average earnings and inflation, has taken the pressure off the Bank of England to increase interest rates. 

The construction industry had the largest downward pull on GDP, which fell by 3.3%, while the services industries made the largest contribution to GDP growth, increasing by 0.3% in first quarter of 2018. However, the longer-term trend shows a weakening in service growth. 

There was a slight step up in UK annual house price growth in April, which gone up to 2.6% from 2.1% in March, according to the latest index data. Prices were up by 0.2% over the month, showing the average price of a house at £213,000 in April, up from £211,625 in March. 

US Dollar – US Markets

US GDP data will be revealed today at 13:30. An expected bullish figure on the back of recent positive economic data build up could mount pressure on the Fed to look at their interest rate policy with renewed focus. This may also bring into question how many times the Fed Reserve will move to increase rates, rather than ‘if’ they will increase rates this year and next.

Consumer spending, which is the biggest part of the economy, is expected to advance 1.1%, the least since mid-2013, resulting in a possible cooling of business investment from its recent sturdy pace. Soft expected results emphasise the inability for the US to follow through with President Donald Trump’s goal of 3% sustained growth, in spite of individual and corporate tax cuts that went into effect in January. 

Euro – European Markets

Euro markets were focused on the ECB meeting yesterday, which did not produce any drastic changes, the benchmark interest rates remained unchanged. During his post-meeting conference, ECB president Mario Draghi, declined to give any clues as to when the end date for QE will occur. The bank has suggested that the recent poor economic performance of the region is down to a ‘’loss of momentum.’’ The ECB will now look to see if this down turn will be a permanent fixture or not.

Germany’s Angela Merkel will be visiting US President Donald Trump in Washington this Friday. Not disillusioned with high expectations, Merkel will focus on trade talks. Ahead of the trip, Germany said that they anticipated the US tariffs on European steel and aluminium to kick in on 1st May, as this date marks the expiration of an exemption which they were granted previously. Merkel is likely to try to negotiate an extensive package, including other industries. 

Other Currencies – Highlights

The Bank of Japan has left the key short-term interest rate on hold at -0.1% as expected, however have reduced their target date for achieving 2% inflation.

The Aussie was rallying at 0.4% against the euro, due to the ECB holding interest rates and deciding to remain silent regarding the end date to their QE policy, as mentioned earlier. However, AUD suffered at the hands of good US economic data, with durable goods coming in at 2.6% over the month and a positive reduction in the unemployment claims.

North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed this Friday to finally end a seven-decade war this year. The leaders are pursuing the “complete denuclearization” of the Korean Peninsula. “We have agreed to share a firm determination to open a new era in which all Korean people enjoy prosperity and happiness on a peaceful land without wars,” North Korean leader said, to the global press.  

What’s coming up? 

UK: BoE Governor Carney will be speaking later today in London following the earlier GDP data release. 

US: GDP data will be released at 13:30. USD fluctuation is very likely.

EU: We are light on any significant EU data today. The main focus will be on German Retail sales and CPI figures, which will be coming out on Monday.