German Factory Orders Surge in March
A strong global demand for German goods supported a higher than expected reversal of the nation’s factory orders in March. The lull in domestic demand was offset by a rise in non-Euro zone exports amid global headwinds, especially a slowdown in China which failed to dampen global demand. Additionally, the just released sentiment index in the Euro zone indicated an improvement in optimism among investors in line with expectations in May. Elsewhere, a report by Halifax showed that house prices fell more than estimates in April.
Across the Atlantic, on a relatively light economic calendar day, investors will eye the labour market conditions index along with a speech by the Chicago Federal Reserve (Fed) President, Charles Evans, scheduled later in the day.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar this morning, hovering below the 1.44 mark, as there is a lack of fresh fundamental drivers in the UK today and also due to a broad strength in the greenback, as markets have largely shrugged off Friday’s weak US nonfarm payrolls report. Meanwhile, data showed that UK house prices, reported by Halifax, declined more than anticipated in April. The movement in the Pound - US Dollar currency pair today will be based on investor perspective of the fast approaching European Union referendum. Looking ahead, this week appears to be a crucial one for Britain, with the Bank of England (BoE) interest rate decision and minutes, the quarterly inflation report and the BoE Governor, Mark Carney’s testimony, all lined up towards the end of this week. Moreover, other economic releases such as the total trade balance, the NIESR GDP estimate for three months ended April along with UK’s industrial production data, will keep market participants engaged this entire week.
On Friday, Sterling lost ground against the greenback for the fourth consecutive day.
US Dollar – US Markets
On Friday, the greenback traded higher against the shared currency and the Pound. In economic news, US employers slowed the pace of hiring in April to record the weakest gain since September last year, taking the shine off the US labour market following months of robust growth and boosting expectations that the US Federal Reserve (Fed) will keep the interest rate pause button pressed for a little longer. Meanwhile the unemployment rate held steady at 5.0% and average hourly earnings came in slightly better than expected on an annual basis. However, the latest figures chime in tandem to a number of other indicators which further muddy the waters for the Fed’s next rate rise. Nevertheless, the New York Fed President, William Dudley, stated that it was reasonable to expect two rate increases this year.
Going ahead, the US labour market conditions index, the central bank’s multi-factor benchmark which offers a deeper read on the underlying trend of the nation’s capacity for generating jobs, is due for release later today and is expected to post a decline.
Euro – European Markets
The shared currency is trading lower against the US Dollar in the morning session. The just out data showed that the Euro zone sentix investor confidence index rose in line with estimates in May, after remaining broadly unchanged for the past two months. Additionally, German factory orders rebounded above expectations in March to its highest level since June last year, mainly led by resilient demand from countries outside the Euro zone, thus indicating that a solid start to the year for the Euro zone’s largest economy might just extend into the second quarter. Looking ahead, investors will keep a close watch on an extraordinary Euro group meeting, scheduled later today. Further, this week will witness the release of Germany's and the Euro zone’s industrial production and GDP figures, along with German consumer price index data.
On Friday, data indicated that construction PMI in Germany declined to a five-month low level in April. On the other hand, Spanish industrial production for March advanced for the first time in four months.
Other Currencies – Highlights
The Swiss Franc halted a four-day downturn and is trading close to the crucial 0.97 mark, after data released earlier during the day showed that Switzerland’s consumer price index (CPI) registered a moderate decline in April. The nation’s CPI advanced above expectations on a monthly basis. Next on the investor radar is the Swiss unemployment rate for April, which is scheduled for release tomorrow.
In the previous session, the Swiss Franc languished near weekly lows against the greenback, despite a weak employment number from the US. The US Dollar – Swiss Franc currency pair briefly dropped after the release of the nonfarm payrolls report, but then bounced back to the upside. In other economic news, Switzerland’s foreign currency reserves recorded a significant increase in April, suggesting that the Swiss National Bank (SNB) might have intervened in the forex market to weaken the domestic currency, given the fact that SNB officials have repeatedly called the franc “significantly overvalued” and have widely expressed their willingness to intervene in currency markets.