UK Grows Less Than Expected
The second estimate of UK’s first quarter GDP matched the government’s initial estimate of 0.3%, trailing market expectations of an upward revision. Following today’s unchanged GDP reading, the BoE is likely to retain its wait and watch approach, with the nation’s inflation perched at multi-year lows.
In the Euro zone, Greece continues to make headlines with recent reports indicating that the cash strapped nation is close to reaching an agreement with its creditors to unlock critical aid, easing fears of a debt default. Across the Atlantic, initial jobless claims and pending home sales data is scheduled for release later today.
Pound Sterling – UK Markets
The latest estimate of UK’s first quarter GDP has dampened investor sentiment and led the Pound lower, after growth was left unrevised at the weakest level since the first quarter of 2013 against market expectations of an upward revision. Revision expectations were spurred by March’s upbeat construction data along with the ongoing improvement in the UK labour market. The ongoing slack in private sector activity and the wider trade deficit seems to affected growth. Today’s disappointing GDP estimate could further delay BoE’s normalization cycle. Meanwhile, the initial investment print showed that Britain’s total business spending climbed higher than market expectations for the first quarter, signalling increased confidence in the nation’s economic activity.
Yesterday, the Pound gave back gains and retraced back to the 1.53 mark against the US Dollar. Separately, an address from Queen Elizabeth confirmed the conservative government plans to hold a referendum on European Union membership by the end of 2017.
US Dollar – US Markets
The US Dollar gave back some of its recent gains against the shared currency, following an initial report that a deal has almost been reached on Greece. However, these claims were dismissed by the nation’s creditors. Meanwhile, the greenback continued to attract traction against the Japanese Yen and the British Pound. In the US economic news, the MBA survey showed that applications for US home mortgages fell last week.
The US Dollar continues to trade on a weaker footing against the Euro this morning. Trading in the greenback against its major currency counterparts today will likely be impacted by significant global economic and political developments. In the US, data on weekly jobless claims and pending home sales, scheduled later today, will be eyed for trading cues. Going forward, the US economy will again be in focus with key releases including the first quarter GDP and the Reuters/Michigan consumer sentiment index, due tomorrow.
Euro – European Markets
The Euro has extended its overnight gains against its key peers this morning. The Euro reversed its prolonged weakness against the major currencies yesterday after the Greek Prime Minister, Alexis Tsipras, indicated that his government is close to finalising a deal to unlock bailout funds from its international creditors, easing concerns of debt default in the near term. However, European creditors rejected these claims and maintained that a breakthrough is not imminent.
In the European economic calendar, data released earlier in the day showed that Germany’s import price growth slowed in April, while export prices climbed at a faster pace. Separately, Spain’s first quarter growth data came in line with the preliminary reading, confirming a robust economic expansion during the previous quarter. Additionally, the final print of Euro zone’s consumer confidence, along with business conditions and industrial confidence data, is scheduled later today.
Other Currencies – Highlights
The Swiss Franc has regained ground against the US Dollar this morning, after Switzerland’s better than expected trade data boosted the local currency. Data showed that Switzerland’s trade surplus widened for April, supported by a plunge in imports. The fall in Switzerland’s imports was more pronounced than the decline in exports during the period. On the other hand, nation’s industrial output declined substantially in the first quarter compared to a year ago, indicating the impact of a strong Swiss Franc on industrial activity. However, the disappointing production data seems to have had little effect on trading, as the Swiss Franc continues to trade on a stronger footing against the greenback.
With no additional domestic macroeconomic indicators to influence trading, market participants will now look forward to the US economic releases, including jobless claims and pending home sales data, due later in the day, for further direction in the currency pair.