UK GDP Data Eyed
With a thin economic calendar today, Sterling investors are focused on tomorrow’s GDP data from the UK. This report will be eyed to gauge the nation’s economic growth for the last quarter of 2014, especially amid recent signs of a slowdown in the UK economy. The data will also determine expectations about the trajectory of interest rates in the nation going forward.
Meanwhile, in the Euro zone, the mostly upbeat German Ifo surveys released earlier today provided support to the Euro, especially after the victory of the leftist Syriza party in Greece caused the common currency to weaken initially against its counterparts. Across the Atlantic, Friday’s soft preliminary Markit manufacturing PMI report cast doubts about the resilience of the US economy to the subdued global conditions.
Pound Sterling – UK Markets
The Pound gained ground against the common currency in Friday’s trading session after data released in the UK showed that, on a monthly basis, retail sales in the nation increased unexpectedly for December. Market participants were anticipating retail sales in Britain to fall last month as the Black Friday sales had caused strong spending among retail shoppers for November.
Going forward, investors will eye tomorrow’s preliminary GDP reading in the UK to gauge the health of the economy for the last quarter of 2014, amid deflationary headwinds from the Euro zone. Traders also look ahead to the release of mortgage approvals in the UK tomorrow. Approvals are expected to ease for December, strengthening concerns that activity in the nation’s housing market is slowing. However, with the overheating trend in Britain’s housing segment seemingly in control now, investors’ anticipate that this sector is unlikely to be a major concern for the BoE in determining the timing of an interest rate rise in the nation.
US Dollar – US Markets
On Friday, the US Dollar pared its early session gains against the Pound following the release of downbeat Markit manufacturing PMI report in the US. The report showed that the pace of manufacturing activity in the nation eased unexpectedly for January, amid a deceleration in new business growth and a lacklustre environment in the export market. With signs of a slowdown in the US manufacturing sector, investors’ fear that the economy’s resilience to the subdued global conditions is weakening.
The greenback surrendered its early gains and is trading on a weaker footing against the Euro this morning. Meanwhile, there are no crucial economic releases scheduled today in the US and market participants now look forward to tomorrow’s consumer confidence and durable goods orders reports in the nation for further direction. Additionally, the Fed’s policy statement, and the preliminary estimate of the GDP reading for the fourth quarter scheduled later this week, will be key macro updates in the US that could help traders gauge the timing of an interest rate rise in the nation.
Euro – European Markets
The left-leaning Syriza party won in Greece’s parliamentary election held over the weekend, strengthening prospects that the newly formed government might embrace a non-austerity policy and renegotiate terms with its creditors to end the nation’s austerity measures. However, Syriza’s leader and the next possible Prime Minister of Greece, Alexis Tsipras, stated that he does not want Greece to exit the EU, thus easing some concerns among investors.
The Euro recovered its early losses as concerns about Greece eased and following upbeat economic releases. The Ifo survey released earlier today showed that morale among German firms improved for January. Going forward, traders will eye December’s retail sales numbers in the Euro zone later today. Considering that the consumer confidence reading remained unchanged in negative territory for December, investors will eye growth in retail sales to verify if the festive shopping season led to a positive impact on domestic spending levels.
Other Currencies – Highlights
The Japanese Yen gained ground against the common currency earlier today and reached a multi-year high against the Euro after Greece’s Presidential election results revealed the victory of the leftist Syriza party in the elections held over the weekend. However, the Yen failed to retain its early session gains against the single currency despite the release of the upbeat trade report in Japan, as concerns over Greece eased. The trade report showed that Japan’s trade deficit narrowed more than expected for December, to its lowest level since June 2013, as a weaker Japanese Yen boosted exports from the nation. Additionally, cheaper oil prices and weak domestic demand weighed on the country’s import growth which further supported Japan’s trade balance last month.
Going forward, investors will keep a tab on Japan’s consumer price inflation and labour market reports later this week for further direction. Furthermore, with the Fed’s policy meeting due this week and the flash GDP data scheduled this Friday in the US, investors in the US Dollar-Japanese pair are likely to remain interested.