US GDP Report Takes Centre-Stage
Data from GfK has revealed an unexpected dip in the consumer confidence index, possibly indicating easing confidence in the UK’s economic prospects. In the coming week, market participants will look forward to manufacturing and construction PMI readings for additional clues to Britain’s private sector activity in the second quarter.
Across the Atlantic, the revised reading of first quarter GDP will be the most noteworthy release today. Markets widely expect that growth will be downgraded. Meanwhile, in the Euro zone, investors continue to monitor negotiations between Greece and its creditors.
Pound Sterling – UK Markets
Yesterday, the second reading of the UK’s first quarter GDP data put a dampener on sentiment towards the nation’s economy, as growth was left unrevised from the preliminary data released last month. The shortfall in economic growth in the first quarter was mainly due to slower than expected growth in the services sector, which makes up almost three quarters of UK output. Furthermore, a wider trade deficit has been a strong drag on growth, with imports growing at a faster rate than exports. Sterling fell against the US Dollar following these figures, nudging close to the 1.52 mark before retracing back to the 1.53 level.
The Pound is trading on a weaker footing against its key peers this morning. Meanwhile, GfK’s consumer sentiment survey showed that shoppers were less upbeat about the UK’s economic situation this month, though the confidence level remains relatively high on the back of favourable factors such as improved labour market, wage growth and lack of inflation pressures. Moving ahead, next week’s releases will provide insights into the performance of the UK’s industrial sector in May.
US Dollar – US Markets
The US Dollar has trimmed part of its losses against the Euro this morning. Later today, the Euro - US Dollar currency pair could be influenced by the second estimate of the US economy’s performance in the January to March period. Today’s US GDP report is expected to show that the economy contracted in the first quarter, as the nation dealt with several temporary setbacks, including severe winter weather and a labour dispute at West Coast ports. Going forward, it is going to be a busy economic calendar next week with key releases on tap, including trade data and non-farm payrolls.
The US Dollar traded on a weaker footing against the Euro in yesterday’s trading session, as investors mulled over the timing of an interest rate rise following contradictory comments from two key Fed officials yesterday. Separately, the initial jobless claims rose unexpectedly last week, while traders were surprised by a strong jump in April’s pending home sales.
Euro – European Markets
The Euro has edged higher against the US Dollar this morning. Data released earlier today showed that German monthly retail sales rose faster than expected for April, signalling that private consumption was aiding economic growth in the Euro zone’s largest economy. Moreover, the recent GfK consumer sentiment data revealed that its forward looking confidence index climbed for June. Meanwhile, market participants continue to closely monitor developments in the debt negotiations between Greece and its international creditors.
The Euro traded on a stronger footing against the major currencies yesterday after Euro zone economic sentiment for May stood at a multi-year high despite the ongoing Greek crisis, thus suggesting that the ECB’s stimulus measures, falling energy prices and a weaker Euro have eased economic concerns in the region. Next week, the ECB Chief’s press conference following the policy meeting will be watched in order to ascertain if the central bank plans to front load a portion of its asset purchase programme in the coming months.
Other Currencies – Highlights
The Japanese Yen is currently trading higher against the US Dollar. Economic data released earlier today in Japan indicated that housing starts advanced higher than expected for April, while the number of construction orders declined from last year, reversing March’s increase. Currency traders will now eye the US GDP report, due later today.
There were a slew of overnight economic releases from Japan. In positive news, Japan’s unemployment rate fell to the lowest level since April 1997. Data meeting market expectations included consumer prices, both core and headline numbers, and industrial production for April. On the flip side, household spending fell unexpectedly for April, as a weak Yen and poor wage growth coerced consumers to curb purchases. The negative surprise on consumer spending has cast doubts over BoJ’s optimism about a steady economic recovery.