UK Political Issues Grab the Headlines
At the start of a new week, political developments in the UK over the weekend are in focus as markets await the upcoming referendum on Britain’s European Union membership in June. The resignation of Brexit supporter, Iain Duncan Smith, from the cabinet, indicate that the UK Prime Minister, David Cameron, might struggle to hold the bulk of the party together in favour of a vote to stay in the Euro bloc. In economic news, earlier today, data showed that UK house prices in March increased for the third consecutive month amid a shortage of properties.
Across the Atlantic, a pair of economic releases including the February data for the Chicago Fed National Activity Index and last month’s profile for existing home sales will stir some market interest later today.
Pound Sterling – UK Markets
The Pound has drifted lower against the US Dollar this morning following this weekend's resignation of senior cabinet minister, Iain Duncan Smith, a leading campaigner for Britain to quit the European Union. Although he stated that his departure was due to the disability benefits outlined in the UK Finance Minister’s annual budget last week, it brought the issue of Brexit back into focus. This led to a trimming of gains witnessed in the Sterling – US Dollar currency pair from last Wednesday’s low and pushing the pair to trade just above the 1.44 mark today.
On the economic data front, the latest survey from Rightmove showed that the average selling price for a property in the UK rose for a third straight month in March. The economic data indicated that the rise in house prices seen at the start of 2016 is partly due to increased demand during this period as investors have rushed to complete their house purchases before the additional stamp duty charge in April.
US Dollar – US Markets
The US Dollar nudged lower against the majors on Friday after the University of Michigan’s preliminary consumer confidence index in the US fell to a five-month low in March. Data indicated that the decline was due to growing concerns among lower-income households about higher expenses as prices at the gas pump marched higher. Additionally, in the recently concluded US Federal Reserve’s (Fed) monetary policy meeting, policymakers’ decision to hold interest rates and trim the annual growth outlook continued to weigh on the greenback.
Going forward, trading in the data-driven greenback could be significantly influenced as the US economic calendar heats up again this week. Today, two updates including the Chicago Fed National Activity Index and existing home sales will attract some market attention. The Fed’s measure in February is anticipated to signal slow but steady growth in overall economic activity. Additionally, sales of existing homes are expected to have modestly dipped last month. However, the numbers will still remain close to a nine-year high, indicating a robust US residential market.
Euro – European Markets
The shared currency has surrendered part of its earlier gains against the Pound this morning. Despite the absence of noteworthy data releases in the Euro zone today, investors hardly reacted to the lone news received earlier today that the Euro zone’s current account surplus slightly narrowed at the start of the New Year. Later today, the German Bundesbank’s monthly report is due for release which contains statistical tables, speeches and analysis of current and future economic conditions from the bank’s viewpoint. Going forward, a string of services activity growth data for France, Germany and the Euro zone are scheduled for release tomorrow, along with the German Ifo and ZEW surveys.
The Euro trimmed gains against the US Dollar and pulled back below the 1.13 mark on Friday. On the economic releases front, German producer prices fell below expectations in February due to lower energy prices. The numbers highlighted the concerns of soft inflationary pressures in Europe and are likely to have weakened confidence about the effect of recent easing moves by the central bank on the economy.
Other Currencies – Highlights
The New Zealand Dollar is currently trading on a weaker footing against the US Dollar after reaching a five-month high on Friday. The Kiwi Dollar gave back its gains against the greenback today after the latest Westpac consumer survey showed that New Zealand consumers were less optimistic in the first quarter of the year as individuals became sceptical about the nation’s economic growth outlook. Much of this was related to signs that conditions in the global economy have deteriorated amid a slowdown in China, signalling difficulties in export trade in the near term. In other news, official figures indicated that the number of visitor arrivals to New Zealand hit a new annual record high last month.
In the absence of further local economic news, traders will keep a tab on a pair of US economic releases today; the Chicago Fed National activity index and existing home sales for further direction. This week, the spotlight will be on the New Zealand’s trade data which will most likely determine trading direction for the Kiwi Dollar later this week.