ECB President Mario Draghi Speaks
In the UK, the just out data indicated that the claimant count unexpectedly climbed for the first time since mid-2015 in March. Meanwhile, the UK's unemployment rate remained unchanged and in line with estimates in February. Earlier in the day, German producer prices remained unchanged from the previous month against expectations for a rise in March. Later today, investors look forward to a speech by the European Central Bank (ECB) President, Mario Draghi, for further insights into the stance of the central bank, ahead of its interest rate decision tomorrow.
Across the Atlantic, investors will eye another update on the housing market in the form of existing home sales in the US. Also on tab will be a weekly report by the Mortgage Bankers Association indicating the number of mortgage applications last week.
Pound Sterling – UK Markets
The Pound lost momentum against the US Dollar and the single currency after the just published data showed that new filings for unemployment benefits in the UK rose unexpectedly in March, rising for the first time since August 2015. Additionally, total pay including bonuses rose less than expected in February, suggesting signs of wage pressures in the nation. Meanwhile, the unemployment rate in the UK remained steady at its record low level in February.
Yesterday, the Bank of England Governor, Mark Carney, stated in his speech that Britain’s exit from the European Union might lead to lower growth in the nation. He also lent support to a report by the UK Treasury which indicated how Brexit could have long term implications on the nation. Amid diverging opinions from various key officials in the UK on whether or not Britain should opt for an exit from the European Union in its 23 June referendum, the BoE Governor along with few key officials have influenced voters against Brexit. Recent numbers from the EU referendum poll showed that more voters were against Brexit.
US Dollar – US Markets
The greenback languished near its lowest level in eight months against the Euro yesterday, after the release of weak US housing data vindicated the Federal Reserve’s cautious approach to raising interest rates. Housing starts fell more than anticipated in March and building permits, a closely watched gauge of future home construction, hit a one-year low level signalling that momentum in the nation’s housing market is facing a slow-down after a robust 2015. At the start of the week, the National Association of Home Builders released a report showing that home-builder confidence remained steady in April. Further, yesterday’s data adds to the recent run-in of downbeat figures such as business spending, retail sales and industrial production, drawing attention to the fact that US economic growth stalled in the first quarter.
Going ahead, a reading on sales of previously-owned homes for the month of March is due later today. Expectations are for the data to show a rebound, following a sharp decline in the previous month. Moreover, the weekly mortgage applications report by the Mortgage Bankers Association is also scheduled for release today.
Euro – European Markets
The shared currency is trading in a tight range against the US Dollar this morning. Data released earlier during the day showed that prices of goods exiting factory gates in Germany for March registered the sharpest annual drop in over six years, mainly led by lower energy prices. This marked the latest evidence of weak price pressures in the Euro zone’s largest economy, where producer prices have been falling since August 2013. Meanwhile, on a monthly basis, producer prices remained flat in March. Moving ahead, investors await remarks from the ECB President, Mario Draghi, due in some time, for further hints on measures to be implemented by the Governing Council in an effort to stave off deflation in the Euro zone.
Yesterday, the Euro posted its fourth straight win against the greenback, after the Euro zone ZEW index of economic sentiment in the Euro region improved significantly in April. Additionally, German economic confidence strengthened for the second straight month in April, indicating modest economic growth in the months ahead.
Other Currencies – Highlights
The Japanese Yen is trading on a stronger footing against the US Dollar and the common currency this morning, after Japan’s trade surplus jumped to its highest level in five-and-a-half years in March, as the stronger Japanese Yen slashed the cost of energy and other imports. Although imports dropped below estimates, a fifteenth consecutive monthly fall has significantly helped in providing a thrust to the nation’s trade surplus. Meanwhile, exports continued to fall for a sixth consecutive month in March but came in slightly better than market estimates.
Earlier, the Bank of Japan Governor, Haruhiko Kuroda, stated that persistent strengthening of the local currency could have an impact on the nation’s inflation, thus adding scope for further easing of monetary policy in its upcoming policy meeting next week. Separately, he also indicated that the central bank might increase purchases of exchange-traded funds (ETF) in the near term to ramp up its presence in the ETF market.