UK Public Debt Borrowing Reduces
According to just released public finances figures, Britain’s government borrowings fell unexpectedly for April. Moving ahead, market participants will note BoE Governor Mark Carney’s comments in his speech, due later today. Traders also await next week’s second estimate of the UK’s first quarter GDP figures for an encompassing view surrounding the performance of the UK economy during the previous quarter.
In the Euro zone, the German Ifo business climate and sentiment index deteriorated less than anticipated from April, easing concerns about the Euro zone’s largest economy. Across the Atlantic, investors look forward to the release of consumer price index data for more hints to the US Fed's next move.
Pound Sterling – UK Markets
The just released public finance figures for April showed that the UK government budget deficit narrowed unexpectedly, led by a rise in April’s income tax revenue increasing the most in two years. These figures have provided a boost to the newly re-elected government. In the session ahead, investors will particularly note BoE Governor Mark Carney’s speech, for his comments regarding Britain’s growth and inflation outlook.
The Pound traded on a stronger footing against a basket of major currencies yesterday, with the Euro falling below the 0.71 mark against Sterling, following the release of Britain’s upbeat retail sales data. Yesterday’s figures showed that retail sales in the UK surged higher than market expectations for April as warm weather, improving levels of income and consumer confidence helped to fuel the rise in sales. Separately, a monthly CBI survey showed that even as factory orders slowed to the weakest level in seven months for May, manufacturers were confident about the short term outlook.
US Dollar – US Markets
The US Dollar is trading on a weaker footing against the Euro this morning, with investors looking forward to the release of US consumer price inflation data for April later today. The annual inflation rate is expected to ease further, despite rising energy prices. Recently, FOMC members indicated that the decision to move the benchmark interest rate would be data driven and not until the Fed is confident that inflation would rise toward its 2% target. In the session ahead, investors will keep a tab on the US Fed Chairwoman, Janet Yellen’s speech for insights to her views about the economy and the future course of monetary policy.
The US Dollar traded lower against its key peers in yesterday’s trading session. The preliminary Markit PMI data showed that factory activity in the US slowed unexpectedly for May, as strength in the US Dollar and poor energy sector investment spending remained key factors of weakness. Additionally, the number of first time jobless claims came in higher than market expectations for last week and existing home sales in the US declined unexpectedly in April.
Euro – European Markets
Extending its gains from yesterday’s session, the Euro continues to trade higher against the US Dollar this morning. On the economic front, data confirmed that the German first quarter GDP expanded in line with the preliminary estimate. Meanwhile, the German Ifo business sentiment indicator declined less than expected for May, easing concerns about growth in the German economy. With earlier PMI releases and economic surveys showing some signs of fatigue in the German private sector, it remains to be seen if Europe’s largest economy shrugs off current headwinds and rebounds during the latter half of 2015. Apart from macroeconomic indicators, market participants are likely to monitor the debt talks between Greece and its international creditors from the EU summit in Riga which began last night.
Yesterday the ECB Chief, Mario Draghi, opined that “growth is too low everywhere”, despite economic conditions having improved in Europe. He also added that inflation in the Euro currency bloc remains too low.
Other Currencies – Highlights
The Japanese Yen has gained momentum and is trading on a stronger footing against the US Dollar after the Bank of Japan (BoJ) earlier today left its monetary policy unchanged and expressed confidence about growth in the world’s third largest economy. The central bank indicated that it is in no hurry to expand its massive stimulus programme, as economic growth is likely to remain supported by domestic demand and a recent pickup witnessed in housing investment and consumption. The BoJ’s upbeat view follows Wednesday’s GDP data which showed that the Japanese economy expanded at the fastest pace in the first quarter of this year due to a modest increase in private consumption. In the session ahead, market participants are likely to shift their focus to the BoJ Governor, Haruhiko Kuroda’s speech later today for comments on the nation’s growth prospects and the central bank’s inflation expectations.
In today’s session, investors will keep tabs on the US consumer price inflation data for direction. Going forward, currency traders will also note Japan’s trade data, which is scheduled over the coming weekend.