Light Macro Calendar in the UK Today
Amid a light economic calendar in the UK, Sterling investors are likely to remain on the sidelines in today’s trading session. Meanwhile, yesterday’s retail sales data, along with disappointing industrial production and construction output data for February, has fuelled concerns that economic growth in the UK has slowed. Next week’s first estimate of GDP numbers will likely confirm investors’ concern.
Across the Atlantic, market participants will eye the highly volatile durable goods orders report scheduled later today which will likely influence next week’s GDP estimates for the first quarter. In the Euro zone, the Greek crisis will likely take center stage in today’s Euro group meeting. In macro news, Germany’s Ifo business climate rose more than market expectations for April, while the business expectations reading unexpectedly dropped.
Pound Sterling – UK Markets
Erasing its previous session gains, Sterling traded on a weaker footing against the Euro yesterday after UK retail sales fell unexpectedly for March. Data showed that sales was dragged down by a drop in fuel sales which added to further evidence that economic growth in Britain slowed at the start of the year. Retail sales, excluding auto fuel rose, albeit lower than the expected for March. Separate figures showed that budget deficit for the fiscal year ended March narrowed more than market expectations, boosting the Conservative-led government as it met its target of lowering the nation’s budget deficit in the 2014/15 financial year, ahead of the upcoming elections next month. However, Britain’s budget shortfall still remains large at almost 5% cent of the nation’s GDP.
The Pound is trading higher against the US Dollar this morning, amid absence of fresh domestic economic news. Going forward, Britain’s initial estimate of GDP growth, due early next week, will be in focus, especially considering that this month’s data releases mostly point towards a sluggish growth for the first quarter.
US Dollar – US Markets
Yesterday, the US Dollar lost ground against a basket of major currencies, following downbeat US economic data. The print showed that sale of new homes in the US plunged more than the market expectations for March, erasing three consecutive months of robust gains. The data was in contrast to Wednesday’s report which showed that existing home sales rose to an eighteen month high for the same period. Adding to the disappointment, data showed that the number of new applications for jobless benefits rose unexpectedly last week. The unemployment claims, along with the disappointing March payrolls report, possibly signal to a slowdown in the pace of hiring in the US.
Extending yesterday’s losses, the US Dollar is trading lower against the Euro this morning. Moving ahead, market participants will today keep a tab on orders for durable goods which are expected to have rebounded for March. However, a surprise decline in orders last month would likely tick down expectations of next week’s first quarter GDP estimates even further.
Euro – European Markets
The Euro is trading higher against the greenback this morning. In today’s Euro group meeting of Euro zone finance ministers and central bankers, the Greek crisis is likely be the central theme of the discussion. Market participants will look forward to news from the meeting to gauge whether Greece and its international creditors have bridged their differences. Additionally, data released by the Ifo institute earlier in the day showed that Germany’s current conditions and business climate indices for April advanced more than expected, leading the Euro higher against the greenback. However, the business expectations index surprisingly dropped for April and along with yesterday’s downbeat report of Markit manufacturing PMI for April that has raised some concerns about the strength of the recovery in Germany.
The Euro traded firmer against the major currencies in yesterday’s trading session, despite the preliminary print of the manufacturing PMI for Euro zone reporting an unexpected drop for April. Additionally, the German Gfk survey showed that consumer morale is set to improve for May, but not as strongly as seen in earlier months.
Other Currencies – Highlights
The Japanese Yen edged higher against the US Dollar in the Asian session today, following comments by the Bank of Japan Governor, Haruhiko Kuroda. Citing tightening output gap and rising inflation expectations, the Governor indicated that trend inflation in the nation is improving gradually. He stated that the output gap, estimated at around zero, will continue to improve going forward. The Japanese Yen was pushed higher against the major currencies, as the Governor’s comments ended speculation that the BoJ will announce further easing measures at its monetary policy meeting at the end of this month. He also added that the central bank was confident of achieving its desired inflation target by 2016. In macro news, Japan’s all industry activity index climbed unexpectedly for February. However, on an annual basis, Japan’s corporate service price index which reflects wholesale prices that companies pay for advertising, rent and other services fell for March.
Since there is no further scheduled domestic release today, market participants will eye the durable goods order data in the US for further trading triggers.