Tag Archives: Financenews

The pound sterling continues to fall against the euro in the run-up to Thursday’s Bank of England decision.

A similar weakness was noticed in the days before previous Bank of England decisions. This means that the Bank frequently shows a reluctance to raise interest rates when necessary, but a strong desire to lower rates at the first opportunity.

Markets are now completely pricing in 50 basis points of easing in the UK by year-end, with the first rate decrease likely in August. However, there was no evident reason for the shift. 

Currency-wise, the key FX pairings remained in extremely tight ranges throughout yesterday. Among the modest price activity to date, the lowering of UK market rate forecasts weighed on sterling.

German industrial production data was issued earlier this morning. It indicated that output fell by 0.4% in March (against -0.6% forecast). 

However, the announcement had no influence on the euro in early trading. The macro calendar for the rest of the day remains very sparse on both.

House prices in the UK have shown signs of growth this morning, with the monthly Halifax report showing a rise in house prices at 0.1 percent.

Looking ahead at this week’s economic releases, the UK will post their latest Interest Rate Announcement, which markets are forecasting another month of no change at 5.25 percent. Focus will shift towards the Bank of England Meeting Minutes, where the discussion of any rate cuts this year will be the area of focus.

Following this, the US will announce their Employment reports. Markets are expecting the Unemployment claims to rise to 215k (from 208k last week).

Friday will be the busiest day this week, with a handful of UK data being released. Starting with Gross Domestic Product, markets are forecasting growth of 0.4 percent quarter on quarter. This will be followed by the Industrial Production figures.

On the currency front, the pound has taken a hit against the dollar. This is likely due to the announcement that the FED feel any rate cuts this year are unlikely.

As for the pound to euro rate, a small sell off has been noticed this morning dropping below the yearly average.

Data-wise, a calm macro calendar had no directional impact on markets. Of the limited releases to mention, the most recent US initial unemployment claims remained at 208k, 

On the currency front, classic safe havens were in demand despite the European session’s slight risk aversion. The dollar, yen, and Swiss franc were all on the front foot. However, the dollar gave up its gains overnight.

The main focus of today will be the April US labour market data. The job market has loosened marginally in recent months, although it remains tight overall.

This pattern is expected to continue, with payrolls increasing by 243k, the unemployment rate remaining at 3.8%, and average wages growth decreasing to +4.0%. y/y

This morning, we have the Purchasing Managers Index figures for Spain, Italy and France, where It is expected that there will be some positive movement on these from the previous month.

German PMI is forecasted to show a slight expansion from March, however it still remains below the 50 threshold that indicates economic expansion.

In the States, the change in the value of new orders is set to come in at 1.4 percent as manufacturing picks up. 

Last night the US Federal Reserve held interest rates in a range of 5.25 percent– 5.5 percent. Inflation in the US remains high at 3.5 percent, well above the 2 percent target rate.

Fed Chair ‘Powell’ indicated last night that it is unlikely the Fed will hike rates again this year.

Following last nights Fed meeting, the US dollar weakened off a little against the pound and euro, as markets lessened their expectations on any future rate hikes.

GBPUSD has regained some of its losses since yesterday evening. Volatility in the market has been low for GBPEUR this week trading in a tight 50-point range.

Tomorrow, we have the PMI services for the UK and Employment figures for the EU. Both sets of data will will be closely watched.

To cap off a busy week, Non-Farm payrolls will garner most of the attention tomorrow where it is expected we could see a fall from the previous month.

Other key US data will be the ISM Non-Manufacturing Survey released at 3pm.

In the Eurozone, we received several sets of early Q1 GDP figures. Quarterly growth forecasts in France, Spain, Italy, and Germany were all higher than expected. Meanwhile, the Eurozone aggregate number rose 0.3% in the quarter, versus a 0.2% projection.

There were also inflation figures, with the Eurozone core HICP rate falling to 2.7% in April from 2.9% (against a forecast of 2.6%).

In the United States, the Fed’s preferred pay indicator, the Employment Cost Index, performed better than expected in Q1, rising by 1.2% (against a forecast of +1.0%).

Currency-wise, the Eurozone GDP statistics gave some support for the euro. However, these advances were short-lived. Instead, the dollar has firmed during the last 24 hours.

This evening marks the end of the two-day US Fed policy making meeting. The general view is that interest rates should not be changed. Indeed, due to higher than expected inflation and recent hawkish Fed remarks, the first-rate decrease is not completely priced in until December.

Therefore, Chair Powell’s press conference will be closely analysed for guidance on the outlook for US rates.