Daily Insight

Yesterday represented a significant day in terms of market movement and data released with the Pound making further gains against the majors, peaking at 1.9025 against the Dollar and 1.4770 against the Euro after the Bank of England released the minutes of it's May policy meeting. For a sixth consecutive month outgoing MPC member, Stephen Nickell again voted for a cut in UK interest rates but surprisingly another member of the nine-strong committee, David Walton, had voted to increase borrowing costs, which was the first time the MPC had been split in this way since August 1998 and gave a clear indication that the Bank of England are beginning to think about a change in monetary policy.

However, there was some negative data released yesterday in the UK as Unemployment reached the highest level in almost three years in the figures released for April with the number of people receiving jobless benefits climbing by 7,700 from March to 945,000, which was higher than expected, while the jobless rate was unchanged at 3%. In addition, UK Average Earnings remained relatively unchanged at 4.2% in the first quarter, which was in line with forecasts as growth in wages maintained the highest level since August last year. There is some important data released this morning with UK Retail Sales expected to show an increase of 0.5% in April with the year-on-year growth rate unchanged at 2.6% as higher utility bills and surging petrol prices has an effect on consumer spending.

The Euro fell by 0.6% against the Dollar yesterday amid speculation that European policy makers may talk down the strength of the single currency after a 6.5% rise against the Dollar in the past three weeks. That follows comments from the French Finance minister, Thierry Breton, that the ECB are willing to do whatever is necessary in making sure this appreciation of the Euro against the Dollar doesn't keep going. With regards the Dollar, U.S Consumer Prices rose by 0.6% in April, while Core Prices, excluding food and fuel, increased by 0.3% from March, which was above market expectations and rekindled concerns that higher inflation will prompt the Federal Reserve in lifting interest rates once more. As a result, the Dollar traded up towards 1.9020 against Sterling before dropping towards 1.8800 at the close of trading for the second day in succession and from a technical perspective, the market failed to reach the low from the previous day of 1.8750, which continues to act as a significant support level.

Data Released 18th May

UK 09:30 Retail Sales (April)

U.S 13:30 Initial Jobless Claims (w/e 13th May)

U.S 15:00 Leading Indicators (April)

U.S 17:00 Philly Fed Index (May)

written by Adam Solomon