Daily Insight

Following on from last week, the Dollar received an unexpected boost on Friday afternoon following new record lows against the majors and touching 1.9000 against Sterling for the first time this year. It can be argued that the Federal Reserve's intention to have a weaker Dollar in order to make U.S exports more attractive to foreign investors is beginning to pay off as the U.S Trade deficit unexpectedly narrowed for the second month in succession despite forecasters anticipating a significant increase in March with the gap in goods and services dropping to $62 Billion. In addition, U.S Import Prices rose by the highest in seven months for April as the prices of goods imported in the U.S unexpectedly rose by 2.1% after a surge in oil and metal prices. However, by the close of trading the Dollar continued to trade above 1.8900 against sterling as the U.S Michigan Sentiment showed that inflated petrol prices are beginning to weigh heavily on consumer confidence, dropping to the lowest levels since hurricane Katrina in September last year.

The Pound has enjoyed a prominent rally in the past few weeks as a distinct recovery in Industrial Production and Manufacturing Output has helped raise speculation that the Bank of England will need to raise interest rates later this year in order to keep inflation in check at 2%. There is some significant inflationary data released this week in the UK with Core Inflation expected to be relatively unchanged as the labour market continues to struggle with unemployment at it's highest level in 3 years and higher energy prices are expected to affect Retail Sales, released on Thursday, with forecasters anticipating the year-on-year growth rate to be unchanged at 2.6%. Sterling may come into some difficulty today as UK House Prices may also suffer in May due to a significant increase in energy prices and therefore higher utility bills, which has a knock-on affect to disposable income.

With regards the Euro, many analysts are predicting a rise in euro-zone interest rates next month with the economic outlook continuing to show signs of growth and the focal point of this week in terms of data released will be on Wednesday as the Core measure for inflation is forecasted to remain unchanged at 1.4% but with growth accelerating into the second quarter the consensus is that euro-zone inflation will reach 1.7%, providing further justification for the European Central Bank to continue raising interest rates this year.

Data Released 15th May

UK 09:27 Rightmove House Prices (May)

U.S 13:30 Empire State Index (May)

U.S 14:00 TICS - Net Capital Inflows (March)