Manufacturing activity data in Europe and Britain is in focus today. On the domestic front, the just released report showed that the UK’s industrial production surpassed market estimates for April while manufacturing production data came in below market consensus. Also, the CBI’s recent warning that economic growth in the UK is falling has increased the significance of today’s NIESR GDP estimates. In Europe, industrial production in France dropped unexpectedly for April, fuelling concerns about weak economic growth in the second quarter.

Across the Atlantic, market focus will be on the US government’s monthly budget statement and weekly numbers for mortgage applications.

Pound Sterling – UK Markets

The just released data showed that UK’s industrial production surpassed market expectations for April, helped by a resurgence in oil and gas production, while manufacturing output dropped unexpectedly as the sector was hurt by a sharp decline in pharmaceuticals. The Pound has nudged lower against the single currency, following the release of these reports. Market participants now look forward to the release of UK’s NIESR GDP estimate for three months ended May due later today, especially after the CBI recently downgraded its 2015 GDP growth forecast. Also, later in the day, RICS housing price data will attract some market attention.

Yesterday’s upbeat trade data provided some support to the Pound against its major counterparts. A rebound in exports helped Britain’s trade deficit to narrow to the smallest level in a year, raising hopes of a bounce back in the overall economic growth from the slump seen at the start of 2015. Additionally, Sterling made recovery against the US Dollar and the Euro in the latter half of the session, amid ongoing deliberations on the EU referendum in the UK Parliament.

US Dollar – US Markets

Yesterday, the US Dollar weakened across the board after its key peers including the Pound and the Euro picked up pace against the greenback in the latter part of the session. However, economic releases in the US continued to provide encouraging signals. A report released by the Labour Department showed that the number of job vacancies climbed to a multi-year high in April, hinting that the US labour market is set to strengthen further in the coming months. Additionally, the NFIB’s business optimism index revealed that confidence among small firms improved in May, suggesting that economic recovery has gained pace from a rough patch witnessed in the first quarter. The report further strengthened belief that the economy garnered strength at the start of the second quarter.

The US Dollar continues to trade on a weaker footing against the major currencies this morning. However, the greenback could recover part of its losses today if the latest MBA mortgage applications data comes in positive. Also, the US government’s statement of its receipts and outlays for May will attract market attention.

Euro – European Markets

The Euro is trading in a tight range against the Pound this morning. Meanwhile, intensifying concerns about the Greek debt negotiations continue to keep investors on the edge, with key issues relating to the agreement for a new deal remaining unresolved. Also, prospects of any compromise in a meeting between the leaders of Germany, France and Greece later today looks doubtful after a fresh proposal submitted by Greek officials yesterday was dismissed as it failed to meet creditor demands. In economic news, industrial production data in France and Italy released earlier in the day provided fresh insights into the manufacturing sector. Factory activity in France for April slumped to the weakest level since May 2014, raising concerns about economic activity in the second quarter. However, industrial activity in Italy grew on an annual basis for April, although the growth does not look particularly impressive.

The revised reading of Euro zone’s first quarter GDP released yesterday confirmed that the economic growth was in line with the preliminary estimate.

Other Currencies – Highlights

The New Zealand Dollar is trading on a stronger footing against the US Dollar, mainly driven by weakness in the greenback across the board. Most of market attention is on the Reserve Bank of New Zealand monetary policy meeting scheduled tomorrow, with currency traders expecting an unchanged policy stance. Although recent economic releases does not support a rate cut by the RBNZ, a confirmation of a steady cash rate might encourage gains in the New Zealand Dollar. Market speculation on the central bank’s next move has heightened following recent measures to tighten lending and tax rules in Auckland's overheated property market. Also, plunging diary prices and the central bank’s failure to achieve its consumer price inflation target suggests a change in policy stance in the foreseeable future.

Data released yesterday showed that there was a strong rebound in retail spending in New Zealand using electronic card in May. The figures received a boost partly due to increased spending on fuel, as oil prices rose and heavy discounting by some petrol companies came to an abrupt end last month.