Daily Insight

Following a quiet start to the week, we have seen some market movement over the past 48hrs and there was some significant data released yesterday on both sides of the pond as Sterling received a slightly unexpected boost when the second estimate for GDP showed that the UK economy expanded by 0.6% in the first quarter to coincide with the first estimate from April 26th with inflation rising above the government's target to 2.2%. It was widely anticipated that the recent pickup in the service sector and the fastest expansion in UK manufacturing in five quarters wouldn't be strong enough to effect the second revision for GDP and forecasters are now predicting a rise in UK interest rates at some point towards the end of this year as the Bank of England signals further growth in manufacturing, business spending and UK exports.

The Euro has gained significantly against Sterling in the build-up to the ECB rate announcement early next month and some extremely positive data coming out of Germany has boosted the single currency this week as we await the release of German Consumer Confidence this morning, which is expected to be relatively unchanged from May at 5.5%.

Following much better than expected New Homes Sales data in the States on Wednesday, the Dollar has continued to hold steady around the 1.8700 level as the U.S economy accelerated at an annual rate of 5.3% in the first quarter, which was faster than the government's initial estimate with growth in goods and services increasing due in part to a sharp rise in U.S exports as the weakening Dollar became for attractive to investors. However, following the robust growth in New Home Sales the Federal Reserve would have been looking for further clarification that a pick-up in the housing market would fuel economic growth into the second half of the year. Therefore, Sales of Existing Homes, released yesterday afternoon, fell by 2% in April to an annual rate of $6.76 Million, which was largely in line with original expectations as a further cooling of the U.S housing market will dampen economic growth this year. There is some significant data released this afternoon in the States with Personal Income and Consumption giving the market the Federal Reserve's preferred measure of U.S inflation and forecasters are predicting that the Core Personal Consumption deflator will almost mirror the Consumer Price Index last week in showing growth of 0.3% in April, taking the annual rate to 2.2%.

Data Released 25th May

GER 07:00 Consumer Confidence (June)

U.S 13:30 Personal Income (April)

- Expenditure
- Core PCE

U.S 14:45 Michigan Sentiment (May Final)

written by Adam Solomon