Focus on UK Election
Sterling investors are likely to tread cautiously on account of national elections in the UK today. With opinion polls showing no clear majority for any of the major parties, markets will eagerly look forward to the outcome of today’s voting. Moving ahead, market participants will eye Britain’s trade data for March, due tomorrow, for more information about the health of the economy in the first quarter.
Meanwhile, in the Euro zone, data showed that factory orders in Germany rebounded at a slower than expected pace for March. Across the Atlantic, market participants will eye unemployment claims data, scheduled later today, for evidence about the strength of the labour market in the US in the start of second quarter. Tomorrow, non-farm payrolls report in the US will likely attract maximum market attention.
Pound Sterling – UK Markets
The UK general election has commenced. So far, the market reaction towards the elections has been fairly muted. However, today election uncertainty seems to be weighing on the Pound, with Sterling trading on a weaker footing against a basket of major currencies this morning. In terms of economic releases, it has been a mixed bag of data for the first three months and the beginning of the second quarter, which has increased the uncertainty surrounding the outcome of the elections. Looking forward, market participants will keep a tab on the trade balance data for March which is scheduled for release tomorrow. However, post elections currency traders reaction to trade data will likely be limited.
Yesterday, the Pound moved beyond the 1.52 mark to trade higher against the US Dollar, after the services PMI data, which is the largest component of GDP, showed that the sector expanded at a robust pace in eight months for April, indicating that sentiment about the health of the economy remained positive.
US Dollar – US Markets
Yesterday, the ADP employment change report led the start to this week’s string of economic releases related to the US labour market. The US Dollar lost ground against the Euro after data showed that the US private employers added fewer jobs, the least since January 2014 and sharply lower than market expected additions for April. The ADP report indicated that the weakness was largely due to the lingering effects of severe winter weather, lower oil prices and surging value of the US Dollar that weighed heavily on the manufacturing sector, resulting in limited job creation in the industry. In a separate report, non-farm productivity declined for the first quarter, marking it the second consecutive quarterly decline. Consequently, unit labour costs for the first three months rose at a fastest pace since the first quarter of 2014, signaling that wage growth is firming.
The US Dollar is trading on a stronger footing against the Pound this morning, ahead of today’s unemployment claims data. Investors will eye this data ahead of tomorrow’s non-farm payroll figures, for cues about job growth for April.
Euro – European Markets
The Euro is trading higher against the Pound this morning as fears of deflation in the common currency union continued to recede in the advent of rising oil prices. Meanwhile, data released earlier today revealed that German factory orders rebounded, following two months of declines. Meanwhile, France’s trade deficit widened for March after having narrowed in the previous month, thus regenerating concerns about the health of the nation’s economy. Going forward, traders will keep a tab on Germany’s industrial production and trade balance data for March, scheduled tomorrow, for more information about the performance of the Euro zone’s largest economy towards the end of the first quarter. Meanwhile, media reports hint that the Greek officials have threatened to default on a repayment to the IMF next week, unless its creditors relax the nation’s bailout conditions. However, Greece yesterday made an interest payment to the IMF on schedule.
Yesterday, the Euro moved above the 1.12 mark against the US Dollar, following robust services PMI data from the Euro zone and some of its economies.
Other Currencies – Highlights
Yesterday, the USD/CAD currency pair moved close to multi-month lows, after the ADP employment change report showed that job creation in the US was less than expected for April, stoking concerns about strength of the US labour market. But later in the day, the Canadian Dollar erased its gains against the greenback. In domestic economic news, Canada’s seasonally adjusted Ivey PMI rose above market expectations to a seven month high for April, thus easing fears about the nation’s economic outlook.
The Canadian Dollar is trading on a weaker footing against the US Dollar, ahead of Canada’s building permits data, scheduled for release later today. Going forward, investors will keep a tab on Canada’s employment report, due tomorrow, which will provide the first glimpse of the economy’s performance for the second quarter after a disappointing first three months of the year. The Canadian labour market report will release around the same time as non-farm payrolls in the US, and the two releases will drive the currency pair tomorrow.