Britain’s Future Consumer Inflation Expectations Rise
This week ends with the release of several data points across the globe. The just out data showed that the UK’s construction output rebounded above expectations in April, suggesting that the British economy might have started the second quarter on a firm footing. Additionally, the Bank of England’s inflation prediction report for the next twelve months came in higher than its previous forecast. In the Euro zone, data indicated that German consumer prices remained steady in May. Further, industrial production in France and Italy rose more than expected in April.
In the US data docket, the University of Michigan's preliminary consumer sentiment index for June is the main highlight of the day. Additionally, the nation’s monthly budget statement for May is also scheduled for release later today.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and the shared currency this morning. The just out data showed that the UK’s construction output rebounded more than expected in April. Moreover, the BoE’s inflation forecast for the next twelve months came in better than the previous estimate, despite looming Brexit concerns and thus making the central bank rethink its decision to hold off on raising the benchmark interest rate for a longer period. Going ahead, investors will brace themselves for the BoE’s interest rate decision and the quarterly bulletin report, due next week. In addition to this, Britain’s consumer price index, ILO unemployment rate, average earnings and retail sales data, will also attract a significant amount of market attention.
Yesterday, data coming from Britain was modestly encouraging as the nation’s trade deficit narrowed to a seven-month low level in April. However, Sterling fell against its American counterpart for the second consecutive session, amid a broad strength in the greenback and due to the upcoming Brexit vote jitters.
US Dollar – US Markets
The greenback gained a strong foothold against its peers yesterday, after the release of upbeat economic reports from the US bolstered optimism over the strength of the nation’s economy. Data showed that the number of Americans filing for unemployment assistance surprisingly fell last week to a six-week low level. Moreover, continuing jobless claims plummeted to its lowest level since October 2000. In further good news, US wholesalers stocked up in April by the most in almost a year, suggesting that companies increased production early in the second quarter as they expect sales to accelerate after a weak first quarter. In April, stocks of machinery and farm products rose, while that of computer and computer peripheral equipment were down.
Going ahead, investors await the release of the US monthly budget statement for May and the preliminary reading of the Reuters/Michigan consumer sentiment index for June, scheduled for release later today. Further next week, investors look forward to the conclusion of the highly anticipated US Federal Reserve’s two-day policy meeting.
Euro – European Markets
The shared currency has extended its bearish note against the greenback at the end of this week. Earlier in the session, data confirmed that German consumer prices held steady in May, in line with investor expectations, redirecting attention towards the European Central Bank’s (ECB) struggle in bringing inflation back to its medium-term target of just below 2.0%. Meanwhile, the nation’s wholesale price index advanced above expectations last month. In other economic news, French and Italian industrial output rose more than expected in April.
Yesterday, the Euro turned lower against its major peers, despite growth in German trade surplus in April. The decline could be attributed to the German export data, that came in flat, further adding to the ongoing concerns of a global economic slowdown. Separately, the ECB Chief, Mario Draghi, reiterated the need for deeper structural reforms in the Euro zone and stressed that the region’s monetary and fiscal policies need to be aligned for better and faster results.
Other Currencies – Highlights
The Japanese Yen trimmed most of its losses and turned positive against the greenback earlier in the day after data showed that Japan’s tertiary activity index rebounded at a faster than expected pace in April. Among individual components of the index, activity was up for real estate and transport activities, while it was down for retail trade. Prior to this, Japan’s domestic corporate goods price index, which measures the price that firms charge each other for their goods and services, rose above expectations in May. Separately, the Bank of Japan’s (BoJ) Deputy Governor, Hiroshi Nakaso, reiterated the central bank’s commitment to achieving the 2.0% inflation target and that they would take additional steps if needed to achieve this goal. Moving ahead, investors await the BoJ’s interest rate decision along with Japan’s industrial production data for April, due next week.
Earlier in the session, the Japanese Yen briefly rallied against the US Dollar after investors sought solace in the safe-haven currency, as commodities and stock prices in major world markets retreated.