Daily Insight

We had a plethora of significant data released yesterday both in Europe and the States as the Dollar reacted violently to weaker than expected Retail Sales data and dropped sharply to trade at 1.8900 this morning, yet another yearly low against Sterling. Following on from robust growth in Sales in March, forecasters were anticipating a monthly increase of 0.5% in April but discounting inflated petrol prices, retail sales actually rose just 0.1%, which is a clear indication that the U.S economy is beginning to slow-down into the second quarter. In addition, the weekly job report on unemployment claims totalled 324,000 first time claims last week, down 1,000 from a week earlier. There is some significant data released this afternoon in the States with the U.S Trade Balance expected to show that the deficit has widened sharply in March with forecasters predicting an increase to $67.2 Billion and we can expect the Dollar to decline further if the figure comes out in excess of market expectations.

Yesterday, the Pound continued to strengthen against the majors with UK Manufacturing Output expanding at the fastest pace in 11 months, rising 0.7% from February, which was way above forecasts of a 0.2% month-on-month increase. In addition, Industrial Production was also up 0.8% in March, which is the highest level in almost 6 years against expectations of a 0.2% gain. As a result, Sterling rallied vigorously with speculation intensifying that the Bank Of England will need to raise interest rates as the UK economy gathers momentum.

The Euro was boosted yesterday with Gross Domestic Product showing support that the euro-zone economy is accelerating faster than previously anticipated, expanding 0.6% in the first quarter following disappointing data in the last three months of 2005 and provided further ammunition for the ECB to lift interest rates to 3.5% by the end of year. The Euro rose to yet another yearly high against the Dollar yesterday and we have now seen a near 5% increase since mid-April alone, closing around 1.2900 last night.

Data Released 12th May

GER 07:00 Final Consumer Price Index

U.S 13:30 Trade Balance (Mar)
- Export Prices
- Import Prices

U.S 14:45 Michigan Sentiment

written by Adam Solomon