Slower UK GDP Growth
Britain’s preliminary estimate of GDP data has shown that growth declined for the first quarter of 2015, indicating that the nation has lost its growth momentum. Going forward, with just over a week until elections, developments from the UK’s political arena could have a greater bearing on Sterling in upcoming trading sessions.
Across the Atlantic, reports on consumer confidence for April and February’s S&P/Case-Shiller home price indices, scheduled later today, will draw markets attention. Focus will shift to tomorrow’s initial estimate of US GDP for the first quarter and the Fed’s interest rate decision.
Pound Sterling – UK Markets
The just released first estimate of GDP showed that the UK’s economic expansion slowed down for the first quarter of this year, dealing a blow to the conservative party ahead of the general elections in Britain on May 6. The preliminary print of GDP growth, at 0.3%, came in below market expected growth of 0.5% for the first three months of 2015. The quarterly growth rate was in line with the weaker than expected reading seen in services, manufacturing and construction data for January and February. Following the disappointing first quarter GDP data, the Pound is trading on a weaker footing against the major currencies.
The Pound traded higher against the major currencies in yesterday’s trading session. The CBI industrial trend survey released yesterday showed that factory order expectations improved less than estimated for April, held back by weakness in export orders, reflecting the recent strengthening of Sterling that makes the nation’s products less attractive globally.
US Dollar – US Markets
The US Dollar lost ground against its major counterparts yesterday, with the Euro moving above the 1.09 mark against the greenback and then falling back slightly. The preliminary print of US service sector activity for April showed that the pace of expansion eased from a seven month high seen in the previous month. The data also indicated that despite a slowdown in the reading, the service sector remained comfortably in the expansion territory and with a robust pace of hiring in the sector, the survey possibly hints at an improvement in the labour market conditions for the second quarter of this year. Separately, the Dallas Fed manufacturing index for April came in better than the last month’s reading, but the improvement fell short of market expectations.
The US Dollar is trading slightly higher against the Euro this morning. Moving ahead, market participants will keep a tab on today’s data on consumer confidence and S&P/Case-Shiller home price indices in the US, for further direction. The US Dollar is likely to witness volatility, with investors looking forward to the first print of GDP for the first quarter and the FOMC interest rate decision, due tomorrow.
Euro – European Markets
The Euro traded higher against the US Dollar, while it traded on a weaker footing against the Pound in yesterday’s trading session. Media reports revealed that the Greek Prime Minister, Alexis Tsipras, has reshuffled the nation’s bailout negotiating team by appointing Deputy Foreign Minister, Euclid Tsakalotos to take charge of the negotiations with its international creditors. This move comes after the Greek Finance Minister, Yanis Varoufakis led team failed to unlock critical aid for the cash-strapped country in the Euro group meeting that was held on Friday.
The single currency is trading on a weaker footing against the US Dollar this morning, amid a light economic calendar in the Euro zone today. Data released earlier in the day showed that the consumer confidence reading in France for April edged up marginally and was in line with market expectations. Going forward, Germany’s preliminary consumer price inflation for April and consumer confidence and economic sentiment data from the Euro zone, scheduled tomorrow, will attract market attention.
Other Currencies – Highlights
The Japanese Yen traded in a tight range against the US Dollar, despite data showing weaker than expected retail sales in Japan for March. Japan’s retail sales declined to multi-year lows which signalled continued weakness in the nation’s private consumption. Consumer spending deteriorated for March due to a high base effect, as shoppers had splurged ahead of an April sales-tax increase in the previous year. Lower energy prices failed to boost consumer spending in the world’s third largest economy, while data indicated that the value of March retail sales was also weighed down by a drop in fuel sales. This dismal data helped stoke speculation that the BoJ will introduce additional stimulus later this year.
With no further domestic economic releases today to trigger trading in the currency pair, investors will focus on Thursday’s BoJ meeting as well as data on industrial production, inflation and employment later this week, for more cues on the economy’s performance for the first quarter.