UK Industrial and Manufacturing Activity Rebounds
The just published update on the UK's industrial and manufacturing activity indicated that manufacturing and industrial production numbers bounced back in March but below estimates. The estimate of the Euro zone’s GDP for the first quarter, scheduled to be released later today, will attract significant market attention. Also on tab will be the RICS Housing Price Balance indicator scheduled for release later in the session. Going forward, the Bank of England (BoE) will be unlikely to raise its benchmark interest rate in the near term as the markets continue to focus on the Brexit referendum scheduled in June. The Euro zone economic docket remains empty today.
Across the Atlantic, today’s releases of the MBA mortgage applications and monthly budget statement will be eyed by investors for further insights into the US economy.
Pound Sterling – UK Markets
The just out data showed that Britain’s manufacturing and industrial production rebounded less than expected in March, thus providing further headroom to the BoE to continue with its accommodative monetary policy stance for an extended period of time. Factory output in the UK registered its biggest annual decline in almost three years in March. Going ahead, Britain’s NIESR GDP estimate for the three months to April is scheduled later in the day. Although the previous estimate came in positive, the disappointing set of PMI readings released last week has raised concerns that the GDP would print a poor reading.
Yesterday, the Pound reversed its five-day losing streak and pushed higher against the greenback after the UK’s trade deficit narrowed more than expected in March, buoyed by a rise in exports. Separately, the latest to hop on to the “Bremain” bandwagon, the NIESR warned that the British economy would experience a significant shock, if it left the European Union (EU). The organisation further stated that a vote to leave the EU would send the domestic currency tumbling.
US Dollar – US Markets
The greenback extended its gains against the Euro yesterday. On the data front, a gauge of the labour market that is closely followed by the US Federal Reserve Chairwoman, Janet Yellen, indicated that job openings in the nation rose to an eight-month high level in March. However, the hiring component of the indicator declined, suggesting that employers experienced difficulty in finding qualified workers for open positions. The report came in the wake of a relatively soft monthly employment report last week, which showed that nonfarm payrolls rose in April by the slowest pace in seven months. Additionally, a measure of US small business sentiment snapped a three-month losing streak and rebounded from a two-year low level in April. A separate report showed that US wholesale inventories posted a modest rise in March, while sales registered its largest increase in almost a year.
Going ahead, the US weekly MBA mortgage applications data and the monthly budget statement for April is scheduled for release later in the day.
Euro – European Markets
The shared currency trimmed part of its losses and has turned positive against the greenback this morning. In the absence of any major economic event in the Euro zone today, market participants will closely follow the US monthly budget statement and weekly mortgage application data, for further direction in the Euro - US Dollar currency pair. Looking ahead, a speech by the European Central Bank's Governing Council member, Ewald Nowotny, is due later today. Additionally, the annual meeting of the European Bank for Reconstruction and Development will also be tracked by investors in the wake of the ongoing migrant crisis. Moving forward, the remainder of the week will be a busy one for Euro zone watchers with the region’s industrial production and gross domestic product data, along with Germany’s consumer price index scheduled for release.
Yesterday, the Euro closed lower against the US Dollar for the sixth consecutive session, as an upbeat US labour market bolstered the greenback. On the domestic data front, German industrial production plunged while trade surplus widened to a record high in March.
Other Currencies – Highlights
The Kiwi Dollar surged above the crucial 0.68 mark earlier in the session after the Reserve Bank of New Zealand (RBNZ) indicated that the central bank was highly concerned about New Zealand’s overheated housing market in its semi-annual financial stability report. However, the central bank stopped short of announcing any fresh lending restrictions, thus quashing speculation of an imminent rate cut at the RBNZ’s monetary policy meeting next month. Further, the central bank expressed concerns about the nation’s dairy industry with continuing low prices and the prospect of farmers facing a third year of negative cash flows, which in turn will lead to a spike in bad loans this year. A separate report released overnight showed that volume of house sales in New Zealand posted a robust increase in April.
Moving forward, the New Zealand manufacturing PMI for April, scheduled for release later in the day, could offer a rallying point for the Kiwi Dollar- US Dollar currency pair if the sector continues to demonstrate strong expansion. Further, the nation’s food price index for April is also on tab.