Daily Insight

In the past 48hrs, the Euro has been heavily boosted after the EU Index for economic sentiment unexpectedly rose to the highest level in five years, despite concerns over rising euro-zone interest rates and near-record petrol prices. There was further positive news for the Euro yesterday as growth in Manufacturing accelerated at the fastest pace in almost six years in May, which was well ahead of market expectations and is the sixth key indicator this week alone that suggests economic expansion is gaining momentum. In addition, the European Commission released it's revised report on first quarter GDP, which showed the fastest euro-region growth since the year 2000 and with the ECB announcement on monetary policy just a week away, speculation is building that the central bank will recommend a further rise in interest rates in the third quarter. There is some significant data released this morning with the Producer Price Index expected to show that prices increased by 0.7% in April with the annual growth rate at 5.3%.

Following a decline in the UK housing market and mortgage approvals in the last month, Sterling has been on the retreat towards the latter part of the week but the revival in UK Manufacturing continued in the figures released yesterday as the CIPS survey showed that output increased for a 10th month in May led by a sharp improvement in UK exports with first quarter industrial production accelerating to the fastest pace in over a year.

The Dollar has made significant gains against Sterling in the wake of the minutes of the last FOMC rate announcement where policy makers suggested that U.S interest rates may need to be increased due to concerns over rising inflation. There was some significant data released in the States yesterday as the ISM Manufacturing index declined by more than expected last month, falling to 54.4 from the five-year high of 57.3 in April. This suggests that higher interest rates are having a negative effect on construction spending and an increase in the price of raw materials is curbing expansion. The focal point of today in terms of economic data released will be the monthly job report this afternoon, which invariably moves the market and forecasters are anticipating that employers in the U.S added upto 170,000 jobs in the last month with the unemployment rate holding steady at the four-year low of 4.7%.

Data Released 2nd June

EU 10:00 Producer Price Index (April)

U.S 13:30 Non Farm Payrolls (May)
- Unemployment / Average Hourly Earnings

U.S 15:00 Factory Goods Orders (April)

written by Adam Solomon