US Jobs Data Eyed
Today the spotlight will be on the US jobs data along with consumer credit change numbers due later today. The nation’s unemployment rate is expected to fall to its lowest level since 2008 in April. Additionally, average hourly earnings growth is anticipated to slightly inch up on an annual basis, while remaining steady on a monthly basis in April. In separate data, the US economy is expected to add fewer jobs following dismal numbers from the recent ADP survey.
With no major economic indicators scheduled to release in the Euro zone, investors will eye next week’s factory orders, industrial production and trade data, scheduled for release in Germany. Meanwhile, the UK data docket also remains empty today.
Pound Sterling – UK Markets
Sterling fell for the third straight day against the US Dollar in yesterday’s session, amid a broad strength in the greenback and after the release of downbeat UK economic data. A PMI survey showed that Britain's services sector grew at its slowest pace in more than three years in April. This is the third major UK PMI release this week that has disappointed. Earlier this week, Britain’s manufacturing output unexpectedly shrank in April while construction output grew at its slowest rate in nearly three years, signalling that the gloomy economic trend in the UK is here to stay. Looking back, the streak of disappointing economic news continues from last month, when the UK jobs market grew at its slowest pace since August 2013. However, the Pound was positive against the shared currency, as the European Central Bank (ECB) bulletin failed to surprise investors and generated a muted response.
Amid a data empty docket in the UK today, next on tap remains the US nonfarm payrolls data, which will generate some movement in the Pound - US Dollar currency pair.
US Dollar – US Markets
Yesterday, the US Dollar edged up against the Euro and the Pound for the third consecutive day. A report released by the US Labour Department showed that the number of people applying for unemployment benefits rose more than expected last week, posting its biggest gain in more than a year. This comes just a day after a separate report indicated that private sector employment in the US declined to a three-year low level in April. Separately, four top US Federal Reserve (Fed) officials stressed that they were open to considering an interest rate increase in June, but only if the latest incoming data proved that the nation is strong enough to handle it.
Moving ahead, investors will scrutinise the crucial US nonfarm payrolls data for April, due later today. Expectations are for the data to print slightly fewer job additions than in March, while the unemployment rate is expected to decline in April. The market will also have their eyes set on the average hourly earnings report, for signs of wage inflation.
Euro – European Markets
The Euro stalled a three-day slide and is trading higher against the US Dollar this morning. Data released earlier during the day showed that Spain’s industrial production rose for the first time in four months in March, recording its fastest increase in nearly two years. Among different categories, energy output and machinery manufacturing increased, manufacturing of durables declined and production of non-durable goods stagnated. On the other hand, in Germany, the construction activity slowed in April, registering its slowest pace of expansion in five months, mainly led by a fall in the rate of employment.
Amid a quiet data calendar yesterday, the shared currency plummeted against the greenback, as investors were left uninspired by the predictable ECB’s May bulletin. The central bank indicated that economic recovery in the Euro zone was continuing gradually and issued warnings about downside risks and a gloomy inflation outlook. However, it failed to move markets as it was largely in line with comments made last month at April’s key interest rate decision.
Other Currencies – Highlights
The Canadian Dollar extended its gains against the greenback this morning, as investors await the latest barometer of economic health on both sides of the border, with the latest employment figures scheduled for release in Canada and the US, later today. The Canadian unemployment rate for April is projected to show a slight improvement, while the US unemployment rate is expected to show a slight decline. Also on the radar will be Canada’s Ivey PMI which is expected to show an increase.
The Canadian Dollar traded higher against the greenback earlier in the session, supported by the recent uptick in oil prices. A massive wildfire in Canada and continuing tensions in Libya severely hampered oil production and raised supply concerns, thus providing a much needed boost to oil prices. The Canadian Dollar has been reeling against the US Dollar after the release of dismal domestic trade data. In economic news, Canadian building permits declined more than expected in March, falling for the second time in the past three months.