Euro Zone’s CPI Eyed
In the UK, the just out data showed that the nation’s unemployment rate continued to remain unchanged for a fifth consecutive month in March, at its long term low level. Related data indicated that the number of unemployed individuals in the UK unexpectedly dropped in April. Additionally, data showed that average earnings excluding bonuses grew at a slower pace than anticipated while average earnings including bonuses surprisingly grew at a quicker pace in March.
In a few minutes, investor focus will shift onto the Euro zone’s consumer price inflation numbers which are expected to show that consumer prices remained unchanged in April. In the US, the major focus will be on the publication of the Federal Open Market Committee minutes by the US Federal Reserve (Fed) scheduled later in the day. The report is anticipated to provide further clues on the interest rate policy in the US.
Pound Sterling – UK Markets
The just out data showed that UK’s jobs market posted a mixed result for the first quarter, as the nation prepares for an increasingly bitter referendum on its European Union (EU) membership. The number of people at work rose and the unemployment rate remained at a decade-low level of 5.1%. However, there were few signs of wage pressure, as the annual pay growth excluding bonuses slowed during the period.
Yesterday, the Pound gained against its major rivals, despite disappointing consumer inflation figures, thanks to the latest EU referendum opinion poll that showed the “remain” vote to be in the lead. Data showed that the UK’s consumer price index for April printed at levels lower than projected, indicating that signs of weakness continue to emerge in the nation’s economy. Britain’s core inflation rate, which excludes items such as food and energy, also slowed last month. Inflation has been below the Bank of England’s 2.0% target for more than two years now and the central bank does not expect to attain that goal until mid-2018.
US Dollar – US Markets
The greenback gained ground against the Euro yesterday after data showed that the US CPI reached a three-year high level, propelled by a rise in gasoline prices and rent, which will sound like music to the ears of the inflation-cautious officials at the US Fed. Excluding food and energy, core consumer prices edged up in line with market expectations. The latest CPI data dovetails the progress seen last week in the labour department’s producer price report, which posted its first uptick since January. Separately, US housing starts rebounded above expectations in April after a sharp dip in the prior month. Moreover, the nation’s industrial production gained traction in April, posting its biggest rise since November 2014, as utility output surged. These upbeat reports follow closely on the heels of last week’s robust retail sales data, thus adding to suggestions that the US economic growth could re-accelerate in the second quarter.
Going ahead, investors will look forward to the Fed’s April meeting minutes, due later today, for further cues on the US interest rate outlook.
Euro – European Markets
The shared currency extended its losses against the US Dollar and the Pound this morning ahead of the much anticipated Euro zone’s final consumer price index (CPI) data for April, due in some time. According to the preliminary estimate, inflation in the 19-nation bloc remains quite depressed. Meanwhile, core inflation came in positive but stays far away from the ECB’s “close to 2.0%” target. The final annual CPI print is expected to confirm a contraction in prices, as deflationary concerns loom large in the Euro zone, while the monthly reading is likely to come in flat.
Yesterday, data showed that the Euro zone’s seasonally adjusted trade surplus rose above expectations to a three-month high level, mainly due to weak imports. Separately, the German Bundesbank, in its latest monthly report, indicated that Germany’s robust economic growth is set to continue in the second quarter, but will lose some momentum given the possibility of a further decline in oil prices and the weaker outlook for exports. Nevertheless, positive labour market conditions are expected to keep consumer spending buoyed.
Other Currencies – Highlights
The US Dollar - Japanese Yen currency pair made a startling recovery this morning and is trading above the crucial 109.50 mark. Earlier in the session, the Japanese Yen gained ground against the greenback, after the world’s third-largest economy surprised markets by reporting its fastest pace of annualised quarterly growth in a year. Data also fuelled questions over the next move by the Bank of Japan, which is notorious for pulling out surprises, first with the controversial decision to adopt negative interest rates during the start of the year and then by holding off from stepping up stimulus measures last month. However, the US Dollar quickly bounced back, buoyed by robust April consumer price inflation figures and hawkish comments by a few US Fed policymakers. A separate report released earlier showed that the final reading of Japan’s industrial production advanced above expectations in March.
Moving ahead, investors will look forward to Japan’s housing loans and machinery orders data and will also scrutinise the US Fed’s latest monetary policy meeting minutes for further insights into the US central bank’s future course of interest rate rises.