US First Quarter GDP in Focus
In the UK data docket, the latest survey by building society Nationwide, which came out earlier today, showed that average house prices in the UK grew less than expected in April, following the introduction of extra taxes on purchases of properties for rental and second homes by the government. In the Euro region, data showed that the German unemployment rate was unchanged in April remaining at its all time low level. Later today, investors will look forward to the first print of the German consumer price index. Also, the Euro zone’s consumer confidence and economic sentiment index will attract considerable market attention.
Across the Atlantic, investor focus will be on US initial jobless claims, annualised domestic growth figures and personal consumption data. Also on tab will be a survey by Kansas Federal Reserve on the manufacturing activity in the region.
Pound Sterling – UK Markets
The Pound trimmed part of its losses and turned positive against the greenback and the Euro this morning. Data released earlier today by the UK’s mortgage lender Nationwide showed that British annual house price growth cooled more than expected in April after the government introduced additional taxes on second home purchases. Moving ahead, investors await the UK’s GfK consumer confidence survey data, due overnight, which is expected to show a drop-off in sentiment.
Yesterday, Sterling weakened for the first time in nine days against the shared currency after data showed that the UK economy registered a tepid growth in the first three months of the year, as looming uncertainty related to the European Union (EU) referendum put a brake on the nation’s growth. Moreover, British retail sales unexpectedly fell at its fastest pace since January 2012. Separately, the latest to hitch a ride on the growing convoy of cautionary advice, the Organisation for Economic Co-operation and Development issued a stark warning that the UK would face a major negative shock if it opts out of the EU.
US Dollar – US Markets
The greenback lost ground against the shared currency in yesterday’s session as investors digested the newly released US Fed statement. The central bank held the benchmark interest rate steady and stuck to its script of gradual rate hikes in the future. In the statement following the meeting, the Fed omitted its previous reference centering the risks posed by global economic and financial developments to the US economy, but instead stated that officials will continue to closely monitor developments. The statement also emphasised the conflicting scenario that exists in the US economy, such as consistent job growth and an improving housing market against a slowdown in business investment and exports. On the data front, contracts to buy previously owned US homes advanced above expectations in March to reach its highest level in nearly a year, indicating sustained momentum in the nation’s housing market.
Going ahead, the preliminary print of official US GDP data for the first quarter, due later today, is expected to record a slowdown, reflecting the Fed’s lukewarm assessment of economic conditions.
Euro – European Markets
The shared currency continues to trade on a stronger footing against the US Dollar this morning. Earlier today, data showed that Germany's unemployment rate continued to remain at its all time low level in April.
In a short while, investors will turn their attention towards the Euro area’s economic sentiment indicator which is anticipated to slightly pick up in April from its previous month’s 13-month low level. Additionally, the final print of the Euro zone’s consumer confidence index is anticipated to mirror its preliminary reading which showed that consumers were slightly more optimistic in April following three consecutive months of deterioration. Going forward, German preliminary consumer price inflation figures, which is scheduled later today, could paint a more optimistic impression on consumers as price pressures are estimated to modestly turn lower for April, making goods more affordable for them. A sharper than expected decline could put pressure on the overall consumer inflation rate in the Euro zone. Prices of consumer goods had surged in the previous two consecutive months, with March's print recording the highest rise since March 2015.
Other Currencies – Highlights
The Bank of Japan (BoJ) managed to pull up another surprise early this morning, by holding the key interest rate steady. Earlier this year, the BoJ had shocked markets by adopting negative interest rates in order to breathe life into the nation’s floundering economy. In an immediate aftermath to today’s decision, the Japanese Yen surged against the US Dollar, putting it on track for its biggest one-day increase since August 2015. Additionally, in a quarterly review of its projections, the central bank slashed its inflation forecasts and pushed back the timing for hitting its 2.0% price target by six months. Elsewhere in the US, the Federal Reserve opted to stay put on interest rates, citing a slowdown in economic activity.
Earlier in Japan, data showed that factory output rose in March while consumer prices declined at the fastest pace in three years and household spending fell, underscoring a lack of confidence among consumers whose buying power remains the key to the nation’s recovery. Further, the nation’s housing starts growth accelerated and construction orders rebounded sharply in March.