Daily Insight

Following on from yesterday and the Euro received a significant boost as the ECB convened to announce their latest policy on euro-zone interest rates. As widely expected, Jean Claude Trichet, the chairman of the ECB, kept interest rates on hold at 2.50% in May but in the following press conference he gave the clearest indication yet that interest rates will be lifted next month following faster economic growth in the first quarter and rising energy prices. There was also some significant data released in the euro-zone yesterday as European Service industries grew at the fastest pace in more than five years in April despite a modest decline expected from March. However, the obvious improvement in the labour market did little to improve Retail Sales, which is only 1.3% higher year-on-year in February and the figures released yesterday were largely in line with expectations showing a 0.1% rise in March.

Sterling has enjoyed a decent rally this week after the release of better than expected Manufacturing data on Tuesday and House Prices look to have risen sharply in April showing a rise of 2% from March. The Bank of England's monetary policy committee announced yesterday that UK interest rates would remain at 4.50% following higher unemployment and weak consumer sentiment. This is the ninth month running that the MPC have left interest rates on hold as inflation dipped below the government's 2% target.

With regards the Dollar, U.S first quarter Productivity rebounded in the first quarter, rising to an annual rate of 3.2% following the first decline in over 4 years in the last quarter and was slightly up on market expectations. However, Productivity gains failed to stay in touch with rising wages and increased benefits raising concerns that the Federal Reserve will need to continue raising interest rates in order to keep inflation in check. There is some very significant data released in the States this afternoon with Nonfarm Payrolls expected to show a moderate decline in April but Average earnings are set to rise to 0.3% from 0.2% in March and the unemployment rate is expected to remain relatively unchanged at 4.7%.

Data Released 5th May

U.S 13:30 Non Farm Payrolls (April)

U.S 20:00 Consumer Credit (Mar)

written by Adam Solomon