Sterling Soars on Conservative Win
Sterling is trading firmer across the board, with early results from the UK election showing that the Conservatives received a thumping mandate, with their overall tally now expected to give them a majority. On the macro front, data just released indicates that Britain’s trade deficit narrowed less than expected for March.
Across the Atlantic, focus will shift towards non-farm payrolls, due later today, which is expected to show an improvement in employment growth for April. In the Euro zone, data released earlier today painted a mixed growth picture of Germany’s economy with industrial output declining unexpectedly and trade surplus widening more than expected for March.
Pound Sterling – UK Markets
The Pound remained volatile across the board yesterday, as market sentiment continued to be dominated by political concerns arising from UK’s parliamentary election. Sterling traded on a weaker footing against the US Dollar, amid uncertainty over the closely contested elections. However, trimming part of its earlier losses, the Pound ended higher against the Euro in yesterday’s trading session.
Sterling has surged against the US Dollar this morning. The Pound is trading higher against a basket of major currencies, following exit polls and early results of the UK general election which suggest that the Conservative party is likely to gain seats, eradicating concerns of a hung parliament. Meanwhile, just released trade data indicates that UK’s goods deficit narrowed less than market expectations for March. However, the Pound seems to have shrugged off trade data as it continues to trade higher against its major currency counterparts.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the Euro this morning, ahead of the non-farm payrolls report scheduled for release later today. After the previous month’s disappointing jobs data, investors anticipate a strong rebound in job growth for April. However, optimism towards today’s payrolls seems to have slightly dampened after the ADP report indicated that the non-farm private sector added fewer jobs in April. In addition to job growth, market participants will also keep a tab on the average hourly earnings and the unemployment rate for April. While the jobless rate is expected to have declined, wage growth is anticipated to have slowed during the previous month.
The US Dollar traded higher against its key peers yesterday after the number of people who filed applications for first-time unemployment benefits remained close to fifteen year low. The jobless claims data having contradicted the ADP report, today’s non-farm payroll numbers will be closely watched for a precise view about the job growth in the nation.
Euro – European Markets
The Euro has lost ground against the US Dollar this morning after data released earlier today fuelled concerns about Germany’s economic growth outlook. Industrial production in Germany declined unexpectedly for March, as production of capital and intermediate goods dropped. Data strengthened fears of weaker demand for the nation’s goods and continued lack of investment. Separately, Germany’s trade surplus widened more than market expectations for March, as the nation’s exports climbed sharply for the second consecutive month. Today’s mixed batch of economic news from the Euro bloc’s largest economy has created uncertainty of its economic growth during the first quarter of this year. Going forward, market participants will eye the first estimate of Germany’s first quarter GDP growth, due next week.
The Euro failed to hold on to its recent gains against the greenback and nudged below the 1.12 mark in yesterday’s trading session. In economic news, the German factory orders recovered, following two months of decline, while France’s trade deficit widened for March.
Other Currencies – Highlights
The Reserve Bank of Australia, in its quarterly statement on monetary policy, offered no clarity on further introduction of easing measures. RBA had slashed the official cash rate to a record low of 2% earlier this week. However, the RBA expressed concerns over the nation’s economic outlook, pointing to slower Chinese growth and weak business investment in Australia. The statement also noted that mining investment would continue to fall and unemployment rate would probably rise to 6.5% by mid-2016. Of particular importance, the RBA revised lower its economic growth expectations outlook to be in the range of 2.5% to 3.5% in the year to June 2016, which was a quarter of a percentage point weaker than previously forecasted. Following the release of the RBA statement, the Australian Dollar moved below the 0.78 mark against the US Dollar.
With no significant domestic releases to influence trading, market participants look forward to the US non-farm payrolls data, scheduled later today, for further direction.