BRC’s Retail Sales Report Due Today
In the domestic calendar, BRC’s retail sales data for May is scheduled for release later today. Among this week’s releases in the UK, the focus will be on trade data for April and the industrial production reading which would provide an insight into the economy’s performance at the start of the second quarter. Also, the publication of the Bank Of England’s inflation report tomorrow will attract some attention.
In Europe, German industrial production showed that output surpassed market expectations in April, echoing the strong rise witnessed in factory orders last week. Across the Atlantic, the labour market conditions index for May, scheduled later today, will offer some perspective on the US job market.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing against the major currencies this morning. The BRC retail sales monitor for May, scheduled later today is expected to show strength, buoyed by the rise in real income and high levels of consumer confidence. Going forward, the nation’s trade balance, due tomorrow, is expected to attract market attention, while mid-week the Pound could experience volatility as a result of manufacturing and production data. Key economic data prints coming out of the other major economies this week are also likely to drive volatility of the Pound against its key peers.
Friday’s BoE inflation expectation report showed that consumer outlook for inflation over the next twelve months rose for May, despite the inflation rate falling below zero in April. This failed to lend support to Sterling. The BoE’s quarterly survey suggests that people in the UK do not expect a prolonged period of deflation and it confirms policy makers’ claims that the recent dip in consumer prices was due to temporary effects.
US Dollar – US Markets
In comparison to last week’s busy economic data schedule in the US which ended with a strong labour market report, this week’s calendar looks lighter. The spotlight will be on the May retail sales report and Reuters/Michigan consumer sentiment index due later this week which will be particularly eyed to see whether income gains from higher employment and wage increase translated into spending and improved consumer outlook. Today’s monthly release of Fed’s labour market conditions index is expected to attract limited attention, however this broad measure is likely to provide additional evidence that the US economy may be stronger than previously assumed.
The US Dollar rallied against its major currency counterparts on Friday, with the Pound falling below the 1.53 mark against the greenback following upbeat jobs data and particularly a pickup in wage growth that reignited hopes that the US economy is regaining momentum following a slow start in the first quarter. The higher than forecast additions in non-farm payrolls also stoked talks on the timing of the interest rate rise.
Euro – European Markets
The Euro has picked up pace and has edged higher against the US Dollar and the Pound this morning. Economic data released earlier in the day provided confirmation that Euro zone’s largest economy is expanding at a robust pace in the second quarter. German industrial production surpassed market expectations for April, as firm domestic demand benefitted manufacturers. The data follows last week’s better than forecasted monthly gain in German factory orders. In addition, Germany’s adjusted trade surplus widened to the highest level ever on record for April, on the back of strong exports. Going forward, market participants will keep a close watch on Euro zone’s first quarter GDP data, scheduled tomorrow, to eye whether the second estimate of GDP growth showed any improvement over the previous estimate. Meanwhile, investors remain cautious amid the ongoing negotiations between Greece and its creditors to avoid another default.
The Euro lost ground against the major currencies on Friday, as concerns about Greece delaying its debt payments weighed on investor sentiment in Europe.
Other Currencies – Highlights
Data released overnight indicated that the final print of Japan’s first quarter GDP data was revised higher, showing that the economy expanded more than the previously estimated. The first quarter annualised growth rate was revised sharply up to 3.9% from an initial estimate of 2.4%, while market participants had been expecting only a slight improvement. The growth numbers came in line with Bank of Japan’s assessment that the nation’s economy is on the path to recovery. The Japanese Yen recovered some of its losses against the greenback, following the upbeat growth data. Separately, Japan’s trade data recorded a deficit in April, while the current account surplus narrowed for the same period.
Survey data released earlier today revealed that Japan’s current economic conditions index slipped for the first time in six months for May, while the outlook index moved higher. The survey, done on people working in industries sensitive to economic trends, indicates that confidence among this section about future outlook is improving.