Britain’s Budget Deficit Less Than Expected
The just released public sector borrowing figures showed that Britain’s budget deficit for May widened from April, although less than market forecasts. The deficit was the lowest reading for May since 2007. However, the Pound has continued to trade lower against the USD.
There is a light calendar day in the US and Europe. Meanwhile, Euro zone leaders have asked for an emergency crisis meeting on Monday, with Greece on the verge of a bankruptcy following no breakthrough in its negotiations with its international creditors at the Euro group meeting yesterday. Meanwhile, producer prices in Europe’s largest economy held steady for May.
Pound Sterling – UK Markets
Data just released showed that the UK government’s borrowing was higher in May from April, although the increase was less than estimated. The Pound has nudged lower against the US Dollar despite the budget deficit recording its lowest level for the month in several years. Looking ahead to next week’s scheduled economic releases in the UK, the calendar looks relatively light and investors are likely to eye the Confederation of British Industry’s industrial trend and distributive trade survey report to gauge the health of the economy in the second quarter. Also, in focus will be the BoE’s inflation and financial stability report due early next week that is expected to shed some light on the outlook for the nation’s economy.
The stronger than forecasted British retail sales data for May pushed the Pound towards the 1.59 mark against the US Dollar yesterday, but Sterling later retraced back to trade in a close range against the greenback.
US Dollar – US Markets
Amid very little economic data on tap today in the world’s largest economy, currency traders are likely to continue to mull over the less hawkish than expected policy statement from the Federal Reserve this week. Investors have also been concerned following Fed Chairperson, Janet Yellen’s uncertain tone post the meeting on Wednesday, which has bolstered the view that the US central bank may not move interest rates until late in the year. Later in the day, a speech by the US FOMC member and Cleveland Fed President, Loretta J. Mester may attract some market attention, for further insights into the policy stance of the US Federal Reserve.
The US Dollar recovered against the majors in the latter part of yesterday’s trading session after the US labour department’s figures showed that the number of people seeking first time unemployment benefits fell more than expected last week, another evidence of a firming job market. However, consumer prices in the US clocked a lower than expected reading for May.
Euro – European Markets
The Euro has extended its losses and is trading on a weaker footing against the major currencies this morning after data released earlier in the day revealed that producer prices in Germany for May remained unchanged from the previous month’s price level, while the annual pace of decline was bigger than forecasted.
In Europe, another failure to make any breakthrough on a cash-for-reforms agreement between Greece and its international creditors in the EU finance ministers meeting yesterday, weighed on the shared currency. The Euro erased most of its earlier session gains and traded broadly lower across the board yesterday. Meanwhile, Euro zone leaders have called for an emergency summit on Monday in a final attempt to try to avert a Greek default crisis after the failure to reach an agreement yesterday brought the prospect of Greece exiting from the Euro bloc a step closer. In addition, the IMF head, Christine Lagarde, warned that Athens would get no leeway if it fails to make a loan repayment of €1.6 billion by the end of this month.
Other Currencies – Highlights
Earlier today, the BoJ decided not to implement any changes in its monetary policy, keeping interest rates steady and also reiterated its pledge to increase the monetary base at an annual pace of JPY80 trillion through purchases of government bonds and risky assets. The BoJ also provided an upbeat assessment of the economy and expressed confidence that economic growth will strengthen enough to accelerate inflation to the bank’s desirable target without further easing. The central bank also highlighted the pickup in exports and revised up its assessment on housing investment amid signs of a recovery. Meanwhile, JPY’s reaction to the BoJ decision was limited and it is trading in a tight range against the US Dollar.
In economic news, a measure of Japan’s industrial activity rebounded in April, though it missed market expectations. Looking forward, markets await Governor Haruhiko Kuroda’s post meeting brief on the policy decision that might influence trading in the Japanese Yen. Last week, the Governor’s comments on the currency’s real effective rate had triggered a rally in the Japanese Yen.