UK Consumer Prices Growth Slows in April
In the UK, the just published data showed that core consumer price growth unexpectedly slowed in April. In separate data, core producer prices rose at a faster than estimated pace in April.
In a few minutes, investors will look forward to the release of the Euro zone’s trade balance data which is likely to show that the region’s trade surplus has widened in March. Later in the day, investor focus will be on data across the Atlantic. The release of US consumer price inflation data is likely to show a slight growth in consumer prices in April. Separately, housing reports scheduled for release later today are anticipated to show that housing starts and building permits climbed in April, thus providing healthy signs of the housing market in the US.
Pound Sterling – UK Markets
The Pound has trimmed a part of its gains against the US Dollar this morning after the just out data showed that the UK’s consumer price index (CPI) surprisingly fell in April for the first time since September 2015, driven lower by the cost of air fares and clothes, thus boosting market expectations that the Bank of England (BoE) might keep the key interest rate at a record low until the second quarter of 2017.
The Pound traded higher against its major rivals in yesterday’s session, after a couple of polls showed the “Remain” camp well ahead in the run-up to Britain’s June 23 referendum on European Union membership. Separately, the Confederation of British Industry (CBI) is the latest to add its voice to the growing clamour of warnings that uncertainty ahead of next month’s European Union referendum is weighing on investment. The BoE, the International Monetary Fund, and the reputed British think-tank NIESR, to name a few, have already enrolled themselves on the coveted “red alert” list. CBI cut its economic growth forecasts and highlighted that the dark cloud of uncertainty is having a tangible impact on the nation’s spending plans.
US Dollar – US Markets
The greenback lost ground against the Pound yesterday after data showed that factory activity in New York surprisingly contracted in May after expanding for the previous two months, as manufacturers received fewer orders and shipments declined, thus reigniting concerns about the strength of the nation’s economy. A separate report indicated that a gauge of home-builder sentiment held steady in May for the fourth consecutive month, suggesting that most builders see optimistic conditions in the single-family housing market.
Looking ahead, investors await data on US CPI for April, due later in the day, for further indications on the US Federal Reserve’s (Fed) next move. Expectations are for the data to post a mild increase, following last month’s gain. The core CPI index is also expected to tick up. Further, the US industrial production is anticipated to post a modest improvement in April. Additionally, the US Commerce Department is scheduled to release a separate report on new residential construction in the month of April. A couple of key Fed officials are also scheduled to speak today.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Market participants look forward to the release of the Euro zone’s trade balance update for March, due in some time. Expectations are for the data to post an improvement which in turn could inspire some confidence in the 19-nation bloc. In addition to this, investors will also eye the release of the German Bundesbank (Buba) monthly report, wherein the central bank publishes its assessment of the nation’s economy. Data released earlier during the day showed that Italy’s trade surplus widened in March. Moving ahead, the Euro zone final consumer price index data for April and the European Central Bank’s (ECB) April meeting minutes are the other key events scheduled for release this week.
Yesterday, the Euro briefly advanced against the greenback after the release of weak manufacturing data in the US. The euro has followed up a six-day losing streak that screeched to a halt last Wednesday by closing higher in two of the last five sessions.
Other Currencies – Highlights
The Australian Dollar rallied to a five-day high level against the greenback this morning after the Reserve Bank of Australia’s (RBA) May monetary policy meeting minutes trimmed market expectations that the central bank would unleash a back-to-back interest rate cut again in June. At the meeting, the RBA had slashed the official cash rate to a record low level of 1.75%, immediately after the release of unexpectedly weak inflation data for the first three months of this year and thereby put its gutsier side on display. The Australian Dollar had tumbled to a record low following the rate cut. A few days after pulling the trigger, the RBA used its quarterly statement on monetary policy to downgrade the nation’s inflation forecasts for this year. Looking ahead, Australia’s Westpac leading and wage price indices data, along with the nation’s unemployment rate data for April, will be keenly watched by investors this week.
Earlier during the session, the Australian Dollar was buoyed by a rise in crude oil prices, which reached a six-month high amid fears of global supply disruptions.