UK Public Deficit Widens in April
A speech by the Bank of England (BoE) Governor, Mark Carney, will attract significant market attention today along with the CBI Distributive Trades Survey scheduled for release later in the session. The just out public finance figures indicated that UK accounts recorded a higher than expected deficit for April.
Earlier today, first quarter-final growth figures for the largest economy of the Euro zone came in line with estimates to confirm its preliminary reading. The German economy expanded at its quickest pace since the first quarter of the previous year. Going forward, investors will keep a tab on the release of the ZEW economic sentiment survey for the Euro region and Germany. In the US, investors will eye new home sales data along with a manufacturing sector gauge by the Federal Reserve Bank of Richmond due later today.
Pound Sterling – UK Markets
The Pound is trading higher against the US Dollar and the shared currency this morning. The just published data showed that the public account deficit in the UK widened more than estimated in April. In the run up to the Brexit referendum, Sterling investors have gained some respite, as recent reports have suggested that the majority of voters are now supporting the campaign to remain in the European Union (EU), as the support for a Brexit faded.
Later in the session, investors will closely watch for comments by the BoE Governor, Mark Carney, and a few other key officials which might provide some clues on the looming referendum on whether Britain should remain in the EU or not. Also, the CBI Distributive Trades Survey, which is scheduled later in the day, is anticipated to show an improvement in the short-term trends of the UK's retail and wholesale distribution sectors.
US Dollar – US Markets
The US Dollar held onto modest gains against the shared currency and the Pound yesterday, after hawkish comments from a pair of Fed officials cemented expectations that a June interest rate increase is on the cards. The St. Louis Fed President, James Bullard, kicked off a busy week of public appearances by Fed members, indicating that a relatively tight US labour market might exert upward pressure on inflation, raising the case for higher interest rates. Soon after, the San Francisco Fed President, John Williams, waded into the interest rate debate and stated that the central bank might raise interest rates two to three times this year. However, the latest economic report painted a gloomy picture of the US economy. Data showed that the US manufacturing sector crept closer to being in a sluggish state in May, mainly led by declining exports and slower expansion of new orders. The nation’s export sales dropped for the second consecutive month while new orders expanded at the slowest pace this year.
Moving ahead, market participants look forward to the US new home sales and the Richmond Fed manufacturing index data, due later today.
Euro – European Markets
The shared currency briefly jumped to fresh daily highs against the US Dollar this morning following the German GDP induced knee-jerk spike, but was unable to sustain the momentum and retreated to a familiar range, currently eyeing the 1.12 handle. Data released earlier during the day showed that the final reading of Germany’s first quarter GDP grew in line with its preliminary estimate with domestic demand being the key driver. Separately, the French business climate index surprisingly improved in May. With the German GDP data behind, next in focus will be the Euro zone's and Germany's ZEW business indices data for May. In Germany, the current situation index is expected to post its first monthly gain this year, while the expectations index is projected to rise for the third consecutive month. Meanwhile, the Euro zone's economic sentiment index is also expected to post an increase this month.
Yesterday, the Euro ended mixed against the US Dollar and the Pound. Data showed that the Euro zone’s consumer confidence index improved above expectations to a four-month high level in May.
Other Currencies – Highlights
The Swiss Franc has surrendered its previous session gains against the greenback this morning. Data released earlier during the session showed that Switzerland’s trade surplus widened in April, led by a rebound in exports and a fall in imports. Further, a separate report showed that the Swiss M3 money supply advanced in April.
Going ahead, trading trends in the US Dollar – Swiss Franc currency pair will be determined by a slew of economic releases from both the US and Switzerland. Investors will also keep a close watch on the US Fed Chairwoman, Janet Yellen’s speech, scheduled later this week, in the run-up to the central bank’s June monetary policy meeting. With regards to economic data this week, investors await the release of Swiss industrial production, UBS consumption indicator, and the ZEW expectations index. Across the Atlantic, data on US durable goods orders, initial jobless claims, and the revised estimate of first-quarter growth and consumer sentiment will attract major market attention.