Busy Economic Calendar Day in the UK and Europe
In a busy day for economic news, investors’ attention will largely revolve around important events in the UK and Europe today. In the Euro zone, inflation figures for March are due for publication in a short while, which will be closely monitored to see whether the European Central Bank’s (ECB) policy easing measures evoked any desired effects on the economy. Separately, the just out final estimate for the December quarter UK GDP revealed that growth was revised upwards from the previous two forecasts. Meanwhile, Britain’s current account deficit printed at a record high for the fourth quarter.
Across the Atlantic, investors will eye today’s initial jobless claims report which releases ahead of the all-important non-farm payrolls report due tomorrow.
Pound Sterling – UK Markets
The Pound retreated against the greenback earlier today as markets digested remarks by the BoE Governor, Mark Carney, while he spoke at the Financial Stability Board’s meeting in Tokyo today. He stated that the lower nominal growth environment poses a significant challenge for global policymakers. However, he added that monetary policy alone cannot solve the low growth problem.
The just out UK growth figures for the fourth quarter brought in some good news, as the British economy ended 2015 on a stronger footing than expected. UK economic growth picked up more than the previous estimates as the service sector continued to contribute to the GDP. Sterling partly recovered from its losses against its key peers, post the release of UK GDP data. Meanwhile, figures showed that the UK’s current account deficit sharply widened in the fourth quarter to hit a record high, underlining pressures from the global slowdown. Today’s disappointing current account data highlights one of the weak spots for the UK economy as the upcoming European Union referendum will make it difficult for the BoE to finance the shortfall in its balance of payments.
US Dollar – US Markets
Yesterday, a survey by the ADP payrolls processor showed that private sector employment in the US increased more than expected in March. Data indicated that services and financial services firms added the most number of jobs, while manufacturing employment barely rose. The employment figures suggested that the US economy remains supported by continuous strength in the US labour market. Meanwhile, the US dollar stayed on the defensive against the common currency yesterday as recent dovish comments by the Federal Reserve Chairperson and a string of mixed Fed speeches continued to pressurise the greenback.
This morning, the US Dollar has managed to recover some of its losses against the major currencies. On the data front, investors will eye today’s weekly data on the number of applicants for first-time unemployment benefits in the US, which is anticipated to remain at a multi-decade low. This comes after yesterday’s upbeat ADP employment data and ahead of tomorrow’s key nonfarm payroll numbers in the US. Also on tab would be the Chicago PMI data which is expected to show that the region snapped out of the contractionary zone this month.
Euro – European Markets
The common currency gave back part of its earlier gains against the US Dollar, while the Euro edged higher against the Pound this morning. Earlier today, the release of a string of economic releases from the first and second largest economies of the Euro zone marked the beginning of a busy trading day for the Euro. Data showed that German retail sales unexpectedly dipped in February and January’s reading was revised lower to show a small decline for the month. The numbers suggest that consumer spending on which the German economy largely relies on for growth, slowed during the period. In France, consumer spending grew above expectations for February, but producer prices were dragged down by prices for the mining and quarrying industry, as well as energy and water.
In a short while, investors will eye the first print of the Euro zone’s core consumer prices data which will be closely tracked for evidence on whether the ECB’s recent policy efforts have had any effect in avoiding the risk of deflation. Later in the day, the ECB accounts for its last meeting are due to be published.
Other Currencies – Highlights
The upside momentum in the Aussie Dollar – US Dollar currency pair faltered earlier today as sentiment for the greenback improved across the board. The Aussie Dollar extended losses against the US Dollar today after a report by the Housing Industry Association showed that Australia’s once-booming housing market took another downturn last month. Sale of new homes in Australia sharply fell in February, the most since July 2014, led by a steep decline in apartment sales. This latest result hints that Australia’s residential market is losing some of its lustre in the New Year. Building approvals, a key indicator for Australia’s residential construction, is due for release in the coming week. This will indicate whether the momentum in the residential construction sector will slow down in the second half of this year.
In separate data, private sector credit in Australia unexpectedly rose in February, hitting a four-month high since November 2015.