Daily Insight

Despite an abundance of strong U.S data in the past week, the Dollar continued to decline through Friday after first quarter GDP data showed that the U.S economy had expanded to an annual rate of 4.9%, the fastest in almost 2 years. However, PMI Manufacturing showed a slight decline of 0.1% in April and as a result, the Dollar plunged to new yearly lows against Sterling and the Euro, closing above 1.8200 and 1.2600 respectively. The Dollar has been severely weakened since Ben Bernanke, the chairman of the Federal Reserve announced last week that the Fed are nearing the end of its current rate cycle after 15 consecutive hikes in almost 2 years. However, yesterday reports began to filter through from CNBC news that Bernanke had claimed that he was misquoted and the market had misunderstood his comments, raising speculation that the Fed were not yet finished in raising interest rates.

There is some significant data released in the UK today with the CIPS Manufacturing survey expected to show some form of improvement in April with forecasters anticipating a rise to 51.2 from 50.8 last month. In addition, the CBI Distributive Trades Survey, released this morning, will give a good indication of the economy in terms of Consumer Spending and the Bank of England will also announce their latest stance on UK interest rates this week with the MPC expected to hold interest rates at 4.50% following UK GDP growth coming in around trend levels for the first quarter.

With regards the Euro, the ECB also meet this Thursday where Jean-Claude Trichet is expected to leave interest rates in May but we will be paying particular attention to the following press conference where we will be looking for the clearest indication yet that Euro-zone interest rates will be lifted in June. There is some important data released this morning, which may have an affect on the Euro with PMI Manufacturing expected to continue rising in April to 56.7 from 56.1 the previous month.

Data Released 2nd May

UK 09:30 CIPS Manufacturing Survey (April)

UK 11:00 CBI Distributive Trades Survey (April)

EU 09:00 PMI Manufacturing (April)

written by Adam Solomon