Britain’s construction sector shows signs of recovery
The just released PMI data showed that Britain’s construction activity bounced back in May. Separately, data showed that consumer borrowing in the UK rose less than expected, while the number of mortgage applications climbed higher than market estimates for April.
In Europe, investors look forward to the region’s consumer price inflation reading scheduled shortly. Meanwhile, traders will continue to monitor Greece’s progress to reach a deal with its creditors. Across the Atlantic, all eyes are pinned on factory orders which are due later today.
Pound Sterling – UK Markets
The just released data showed that activity among builders improved for May, as investment in the sector is likely to have picked up following reduced uncertainty after the decisive general election result. Additionally, BoE’s mortgage approvals data showed that the number of applications for home purchases was higher for April, indicating that activity in the housing sector is likely to perk up gradually in the coming months. Also, BoE’s lending figures revealed that growth in lending to consumers remained strong in the UK. The Pound is trading higher against the US dollar, following the release of the data.
Sterling dropped below the 1.51 mark against the US Dollar yesterday after data showed that the manufacturing sector continued to act as a minor drag on the British economy. Going forward, currency traders will eye service sector growth data tomorrow, with output in May expected to remain on a stable upward trajectory.
US Dollar – US Markets
The US Dollar failed to cling to its recent highs and surrendered some of its recent gains against the single currency in today’s trading session. In the day ahead, market participants will shift their attention towards a fresh set of macro releases including factory orders and IBD/TIPP economic optimism data, to gather additional insights about the health of the US economy. With markets expecting factory orders to register a marginal decline, any positive surprise could lift the greenback again.
The US Dollar nudged higher against the Euro following the release of mostly upbeat economic data in the US during yesterday’s trading session. Better than expected ISM manufacturing data and construction spending boosted the greenback across the board. However, a rise in the savings rate stalled April’s core personal consumption expenditure index at the previous month’s level even as incomes rose.
Euro – European Markets
Recovering from yesterday’s losses across the board, the Euro is trading higher against the major currencies this morning. However, threat of a Greek default looms large, as an imminent deadline for a payment to the IMF by the Greek government nears. Later in the day, a preliminary publication of the consumer price index in the Euro zone is anticipated to show that annual inflation posted a positive reading for May, with prices rising 0.2% annually. Today’s report releases a day after German CPI recorded the largest increase since October 2014, amid signs that the ECB’s monetary stimulus measures and a pickup in energy costs have pushed up consumer prices. Data released earlier today indicated that the German unemployment rate stayed at a record low of 6.4%in May.
The Euro traded on a weaker footing against the US Dollar yesterday after upbeat economic releases from the US.
Other Currencies – Highlights
The demand for the Australian Dollar spiked, thereby pushing the AUD/USD currency pair higher, close to the 0.77 mark. In its monetary policy meeting this morning, the RBA kept its cash rate steady at 2%, in line with market expectations. The policy statement sounded less dovish than expected as the RBA provided no hints of further easing in the coming months, which led the Australian Dollar to strengthen across the basket of major currencies. However, the statement did give an impression that the RBA will continue to monitor economic developments in the coming months to assess the economy’s outlook and whether the current stance of policy has encouraged growth and inflation in Australia. Additionally, Australia’s current account deficit widened slightly less than market expectations in the first quarter of this year.
There are a number of key reports scheduled this week that are likely to influence trading in the Australian Dollar against its majors, among which tomorrow’s GDP report for the first quarter is the most significant. A negative surprise in GDP growth may raise expectations that the RBA may have to rethink on further easing going forward.