ECB Monetary Policy Outcome Eyed
The European Central Bank (ECB) is anticipated to keep its key interest rates unchanged after it decided to trim interest rates in the previous monetary policy meeting to an all-time low level. However, investors will be keenly awaiting insights about the state of the overall Euro zone economy from the ECB’s monetary policy statement. Moving ahead, investors will look forward to the initial jobless claim numbers in the US, along with the national activity survey by Chicago Federal Reserve (Fed) and manufacturing survey by Philadelphia Fed. Also on tab will be the US housing price index scheduled for release later today.
Meanwhile, the just out data showed that UK retail sales contracted more than estimates in March. This was a second consecutive monthly contraction in the nation’s retail sales. Separately, data showed that UK national accounts posted a slightly lower than expected deficit in March.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and the common currency this morning after the just published data showed that retail sales in the UK fell more than estimated in March. The primary gauge of consumer spending in the nation continued to contract for a second straight month and unexpectedly at a faster pace last month, as consumer spending in the UK fell on products ranging from food to clothing. The study, 'State of the Retail Supply Chain 2016', showed that more than half of the UK's retail businesses faced issues over supply chain planning and execution, especially with the automation of its key processes. In separate data, the UK’s public accounts recorded a deficit for a second consecutive month in March, which is slightly lower than estimated as the rise in government receipts outweighed the minimal rise in spending.
Later in the day, investors will be looking forward to a speech by the Bank of England Governor, Mark Carney, for further inputs on the state of the UK economy and on the fast approaching Brexit referendum.
US Dollar – US Markets
The greenback erased losses against the Euro and the Pound yesterday, as upbeat existing home sales data for the US eclipsed the previous session’s disappointing housing sector reports. Data released by the National Association of Realtors showed that sales of previously owned homes rebounded in March, following a February slump, a sign of recovery in the housing market as buyers overlooked tight inventory and rising prices. The report followed closely on the heels of data indicating that US building permits unexpectedly fell and housing starts declined more than expected in March. Additionally, an April gauge of home builder sentiment held steady for the third straight month. A separate report by the Mortgage Bankers Association showed that US mortgage applications advanced for the third consecutive week to reach a two-month high last week, as interest rates on 30-year fixed rate mortgages remained low.
Going ahead, the weekly update on US jobless claims, the Philadelphia Fed manufacturing survey and the Federal Housing Finance Agency’s report on house prices will shed more light on the US macro trend.
Euro – European Markets
The shared currency is trading range-bound against the US Dollar this morning ahead of the ECB’s interest rate decision meeting scheduled later in the day. Expectations are that the central bank will hold its key interest rates unchanged at its record low level after it slashed rates to zero in its previous monetary policy meeting in March. Market participants will zoom in on the ECB President’s overall tone and forward guidance statements, as he is likely to focus on defending the central bank’s dovish policy stance. Last month, the central bank unleashed a volley of monetary policy measures in an ongoing effort to kick-start economic growth in a stagnant Euro zone economy.
Earlier in the day, a survey showed that the business climate that indicates the performance of the overall French economy on a short-term basis, came in better than market expectations in April to remain unchanged from the previous month. Going forward, investors will eye the first print of the Euro zone’s consumer confidence index scheduled later today.
Other Currencies – Highlights
Today’s reading of the Swiss trade balance by the Federal Customs Administration showed that the nation’s trade surplus narrowed more than expected in March following a sharp decline in the nation’s export volumes, while imports surged higher. The decline in exports was mainly due to weaker demand for Swiss watches in March amid a global economic slowdown.
The Swiss Franc was hardly affected by the downbeat economic data and is trading higher against the US Dollar this morning. Looking at the wider picture, the US Dollar - Swiss Franc currency pair has continued to show a downward trend since its 5-year high level of just above 1.03 mark recorded in November 2015. Meanwhile, the uncertainty over the interest rate path in the US for this year has continued to weigh on the greenback. In the week ahead, trading in the currency pair will be dependent on economic releases in the US with only the KOF leading indicator scheduled to release in Switzerland towards the end of the week.