The Dollar plunges to trade over 1.8000 for the first time this year
We witnessed a significant day of market movement yesterday with the Dollar plunging to a yearly low against the majors following Ben Bernanke's comments at the Joint Economic Committee of Congress. The Federal Reserve chairman gave the clearest indication yet that they are nearing the end of their current rate cycle after raising U.S interest rates fifteen consecutive times in just 21-months to a five-year high of 4.75% with the next scheduled FOMC meeting on May 10th. As a result, the Dollar weakened to trade above 1.8000 against Sterling for the first time in 2006 and with some important U.S data released this afternoon, we will be looking for further evidence of a slow-down in the economy with first quarter GDP released at 13:30.
UK House Price growth dropped sharply in April according to a monthly nationwide survey with prices rising by just 0.1% against an increase of 1.1% last month and annual house price inflation fell to 4.8% from 5.3% in March. There is some significant data released in the UK this morning with Consumer Confidence expected to decline in April following higher energy prices and rising fuel costs.
The Euro continues to make gains against the majors after reaching 1.2540 against the Dollar in the aftermath of Ben Bernanke's comments yesterday afternoon and we continue to trade under 1.4400 against Sterling with Eurozone inflation expected to rise from 2.2% in March to 2.3% this month with the initial estimate released this morning.
The Dollar fails to react despite New Home Sales rocketing to the highest level in 13 years
There was some significant data released in the UK yesterday with GDP projecting that the economy accelerated to its fastest pace in a year during the first quarter, expanding 0.6% due in part to a revival in Industrial Production and an overall improvement in UK exports. However, without any significant British data released until Friday, we will look at Consumer Confidence with many analysts anticipating a slight decline in April following a significant climb in fuel prices.
The Dollar remained relatively unchanged yesterday despite an unexpected rise in Durable Goods Orders in March and a significant increase in the Sales of New Homes, which jumped to the highest level in almost 13 years. Orders for Durable Goods rose by 6.1% against forecasters expectations of a 1.8% increase from February and New Home Sales rocketed by 13.8% last month to an annual rate of $1.213 Million. As a result, the Dollar failed to react and we continued to trade up towards 1.7900 against Sterling despite the data showing positive growth in Manufacturing output and posed some unexpected relief for a declining U.S housing market.
In the past week or so, the Euro has made significant gains against the majors, particularly the Dollar after trading up to a 7-month high this week and we can expect to see further Euro solidarity this morning with German Unemployment figures set to narrow by 0.1% in April.
The Euro advances as German Business Confidence jumps to a 15-year high
The Euro has made significant gains in the past 24hrs with German Business Confidence unexpectedly rising to a 15-year high in April against forecasters predictions of a slight decline from March due to higher energy and oil prices. The ifo Index rose to 105.9, the highest level since April 1991, which has increased speculation that the ECB will need to raise interest rates again in the coming months as growth in Europe's largest economy begins to gain momentum and there is some significant data released in the Euro-zone this morning with Industrial Production set to climb 0.2% in February.
With regards Sterling, UK Factory Orders declined to their slowest pace in more than a year, however, the Confederation of British Industry continue to remain positive regarding future manufacturing output despite a slight drop in UK exports this month.
The Dollar was given an unexpected boost yesterday with U.S Existing Home Sales rising 0.3% in March to $6.92 Million while many analysts were anticipating further evidence of a cooling housing market. In addition, U.S Consumer Confidence unexpectedly rose to its highest level in four years primarily due to an improving market, which seems to have quashed concerns over higher petrol prices. There is some important data released this afternoon in the States with U.S Durable Goods Orders expected to climb 1.8% in March and if New Home Sales also shows unexpected growth, speculation will intensify that the Federal Reserve will continue raising interest rates twice more this year.
U.S Consumer Confidence expected to decline following higher energy costs and rising fuel prices
Initially, Sterling rallied yesterday on the release of UK Retail Sales data, which came out largely in line with expectations, showing a rise of 0.4% in March and British Mortgage lending increased by its largest amount in nearly two years last month, suggesting that the housing market continues to look buoyant, rising to £5.4 Billion from £4.7 Billion in February.
The Dollar came under further pressure yesterday as comments from Qatar and Russia increased speculation that central banks are shifting their reserves away from the Dollar and we can expect to see some movement this afternoon with U.S Consumer Confidence expected to decline in April to 106.0 from 107.2 the previous month. Coupled with that, Existing Home Sales in the States is predicted to drop to $6.7 million in March, following a slight improvement in February and provides yet more evidence that the U.S housing market is in decline.
With regards the Euro, French Business Confidence rose to a five-year high yesterday and German Industrial Production gained for a third month running, providing yet more evidence that economic growth is beginning to accelerate in the euro-zone into the second quarter. As a result, the Euro traded down towards the 1.4400 level and we can expect to see further market reaction today with the German Ifo business climate survey expected to remain relatively robust in April but is expected to show a partial decline from March, primarily due to a sharp rise in oil prices.
The Dollar weakens further as the Russian Finance Minister suggests that oil should be priced in Euros as appose to Dollars
In the past week, the Dollar has weakened significantly against the majors amid speculation that U.S economic growth will begin to wane into the second quarter and the Federal Reserve is nearing the end of its current rate cycle. The Dollar traded down to a seven month low against the Euro last week and we are currently trading towards 1.7900 against Sterling, following a statement from the Russian finance minister indicating that oil should be priced in Euros as appose to Dollars as the spiralling price of crude oil closed at $72.79 a barrel on Friday.
We have some significant data released in the States this week with U.S. Consumer Spending, due out tomorrow, poised to show a decline to 106.0 in April primarily due to higher petrol prices and rising energy bills. In addition, the dollar may come under further pressure with U.S Existing and New Home Sales both expected to show a decline in March and slowing manufacturing growth will provide an indication that the Federal Reserve are to likely to raise interest rates just once more this year.
In the UK today, Sterling may receive a boost with Retail Sales forecasted to show a rise of 0.4% in March, despite the timing of the Easter period, which came too late to be included in today's figures and year-on-year growth is predicted to rise to 2.5% from 2.1% the previous month. With Regards the Euro, Industrial Production in Germany is expected to show a sharp increase in February with the year-on-year growth rate jumping from 3.2% to 5.8% and there is some important data released in the euro-zone tomorrow with the German Ifo index expected to show a slight decline in April primarily due to rising oil prices and euro-zone inflation, due out on Friday, is anticipated to show an improvement to 2.3% in April.
Sterling takes a knock as UK Inflation drops below the government's 2% target
Sterling weakened against the majors yesterday as UK inflation unexpectedly slowed to its weakest pace in more than a year as Consumer Prices rose 0.2% in March, putting the annual rate at 1.8% against the government's target of 2%. As a result, Sterling traded down against the Dollar and the Euro as speculation increased that the Bank of England will need to cut interest rates in order to keep inflation on target in the coming months.
In recent weeks, the Dollar has received a boost from a seemingly improving labour market as initial jobless claims in the U.S fell by more than 10,000 last week to 303,000 from 313,000 a week earlier, signalling the lowest unemployment rate since 2001. The Philly Fed Index, which focuses on manufacturing in the Philadelphia region, rose by more than anticipated in April to 13.2 from 12.3 the previous month as a growing overseas market, particularly in Asia and Europe, increased demand. In addition, an index of U.S. Leading indicators unexpectedly fell for a second month in March, declining 0.1% from February, which was the first two-month drop in over 5 years and provides yet further evidence that economic growth will slow in pace into the second quarter.
With regards the Euro, French Consumer Spending declined for the first time since the turn of the year in March, dropping 0.6% and there is also some important data released in the Euro-zone this morning as February's Trade Balance figures are expected to widen from €10.8 Billion. Data Released 21st April
The Dollar may strengthen ahead of the release of the Philly Fed Index
Sterling has enjoyed a mini-rally in the past 24hrs as the Bank of England's Monetary Policy Committee released the minutes of its last meeting, again showing a spilt of 8-1 in favour of keeping interest rates at 4.50% in April as Stephen Nickell voted for a quarter-point cut for the fifth month running. We briefly traded up through 1.4500 against the Euro and although we closed just below this level, there is some significant data released in the UK this morning with the Consumer Price Index expected to show a mild improvement in the month of March. In the Euro-zone, following Romanov Prodi's narrow election win, Italian Consumer Confidence is forecasted to show a drop in April as the closest Italian national election in history prompted concerns that the government will be incapable of expanding economic growth in Europe's fourth largest economy.
With regards the Dollar, U.S Consumer Prices rose by 0.4% in March, which was largely in line with expectations but Core Prices rose by the most since March 2005, jumping 0.3% last month. However, the Dollar continues to struggle against the majors after dropping to a seven month low against the Euro and we briefly traded upto 1.7900 against Sterling yesterday afternoon before closing just under this level.
There is some significant data released in the States this afternoon with U.S. Leading Indicators expected to be unchanged in March following a 0.2% decline in February, supporting suggestions that economic growth will slow into the second quarter. In addition, the Philly Fed Index, which examines manufacturing in the Philadelphia region, is predicted to support the view that the Federal Reserve can keep lifting interest rates and may give the dollar a much needed boost after dropping 4% against the Euro in the first fourth months of the year.
With the Federal Reserve nearing the end of its current rate cycle, the Dollar drops to a seven month low against the Euro
The Dollar has been suffering in the past week amid suggestions that economic growth will slow into the second quarter and yesterday we witnessed further evidence of a cooling housing market in the States as builders started work on the smallest number of new houses in a year last month, falling 7.8% to an annual rate of 1.96 million. However, U.S. Producer Prices came out in line with expectations, showing growth of 0.5% in March as costs of crude oil and petrol prices soared to record highs.
In addition, the minutes of the Federal Reserve's last policy meeting was released last night and the Fed chairman, Ben Bernanke, has indicated that they are nearing the end of their current rate cycle following 15-rate increases in 21 months. Without stipulating when a tightening of monetary policy will take place, many analysts are speculating that the Fed will lift interest rates in May and then pause at 5%. In the aftermath of the announcement, the Dollar weakened against Sterling to trade just above 1.7800 and dropped to a seven month low against the Euro. There is also some significant data released in the States this afternoon with the Consumer Price Index set to show an increase of 0.4% in March and Core Prices are expected to rise 0.2% from February.
In the UK today, the minutes of the MPC's last policy meeting are released this morning after the Bank of England elected to keep interest rates at 4.50% on April 5th. We have already seen some data released this morning in the Euro-zone with German Producer Price Inflation maintaining a 24-year high last month, due primarily to higher energy costs as the price of oil has averaged $60 a barrel since the middle of last year. Oil prices climbed to a record high yesterday of $71.60 a barrel as concerns over the situation in Iran intensified.
The Dollar weakens on speculation that the Fed will tighten monetary policy, fuelling concerns that economic growth slowed into the second quarter
Following on from last Thursday, Retail Sales in the U.S. rose by more than expected in March as an improving labour market and higher household incomes bolstered consumer spending with the average growth rate accelerating to its fastest pace since the third quarter of 2004. There is some significant data released in the U.S. this afternoon with the Producer Price Index set to show a rise of 0.4% in March following a decline of 1.4% in February. The dollar is being hampered as further evidence of a cooling housing market continues to fuel concerns that economic growth will begin to slow into the second quarter, prompting the Federal Reserve to stop raising interest rates. As a result, we traded as high as 1.7730 overnight and a close around this level will look very positive for sterling with the minutes of that last FOMC meeting released this evening.
Sterling may come under pressure this week as speculation that slowing economic growth will prompt the Bank of England to lower UK interest rates following disappointing Retail sales data from the BRC and unemployment rising to its highest level in almost 3 years. The BoE release the minutes of its March meeting tomorrow after electing to hold interest rates at 4.50% for the eighth month in succession. There has already been some positive data released today in the UK today with the average price of a British home rising to a record high for a third month in April, climbing 1.1% to £205,674.
With regards the Euro, the market is relatively unchanged from last week as we continue to trade under 1.4500 and without any significant data released in the euro-zone until tomorrow with Industrial Production and German Producer Prices, we don't anticipate too much movement today.
Data Released 18th April
U.S. 13:30 Producer Price Index - Excluding Food and Energy
Sterling stands firm as UK Average Earnings rise year-on-year, shrugging off poor unemployment data
Sterling stood firm yesterday after the news that the number of Britons out of work and claiming benefits rose by almost double market expectations in March while UK Average Earnings in the three months to February climbed to 4.2% year-on-year against the 3.6% forecasted. The March claimant count showed an increase of 12,600 new claims last month while currency exchange analysts were anticipating a rise of 6,500, pushing the unemployment rate up 3.0%, the highest level since October 2003.
The Euro weakened against Sterling yesterday as the European Commission cut it's forecast for economic growth in the euro-zone as rising oil prices and higher interest rates harm consumer spending. The economy will expand 0.6% in the first and second quarters of the year and 0.5% in the third after the EC forecasted a 0.7% growth rate just last month.
With regards the Dollar, the U.S Trade deficit narrowed by more than anticipated to $65.7 Billion in February from the record gap last month, led by a temporary decline in Chinese imports. The Dollar was largely unaffected on release of the deficit as the 4.1% drop from January did little to ease demand for sanctions. There is some significant data released in the States this afternoon with U.S Retail Sales predicted to show a 0.4% rise last month, due primarily to an improving labour market and a pick-up in consumer spending. The Dollar may strengthen if the figure is released in line with expectations as speculation will increase that the Federal Reserve will lift borrowing costs twice more this year.
UK Unemployment Claims probably rose to the highest level in almost 3 years
Sterling came under pressure yesterday as Britain's Trade deficit in goods and services remained largely unchanged at a record level of £5.7 Billion, providing further evidence that UK exports won't be able to fuel economic growth into the second quarter. In addition, UK Retail Sales showed the first decline in 5 months according to the British Retail Consortium, dropping 1.4% year-on-year in March, partly because of the timing of the Easter holiday. Sterling may be hampered with the release of UK unemployment claims this morning and forecasters are expecting an increase of 6,500 last month with the number of Britons claiming benefits rising to the highest level in almost three years to 926,000.
In the past 24hrs, the Euro has weakened against the majors as German investor confidence unexpectedly dropped for a third month in April amid concerns that consumer spending is beginning to decline in Europe's largest economy. The latest index from the ZEW centre for economic research fell to 62.7 from 63.4 in March against expectations of a rise to 65.5.
We have a significant day of data released on both sides of the Atlantic with the U.S. Trade Deficit expected to narrow to $67.5 Billion in February, following the record $68.5 Billion gap the previous month. However, we have traded as high as 1.7547 this morning despite speculation that U.S economic growth is accelerating faster than anticipated in the first quarter and if the deficit unexpectedly widened in February, we can expect further dollar weakness as we approach the significant resistance level at 1.7600.
Data Released 12th April
UK 09:30 Unemployment Claims (March) UK 09:30 Average Earnings (3 months to February)
Sterling expected to come under pressure from the UK Global Trade Balance
We experienced a relatively quiet day yesterday as Sterling stood firm amid suggestions that House Price inflation across the UK slowed in February, according to the office of the Deputy Prime Minister, despite recent surveys from Halifax and Nationwide stating the opposite. In addition, Input and Output Producer Prices came out in line with expectations at 13.1% yesterday, while output prices were down 2.5% from 2.9% in February. We have already seen the release of the BRC Retail Sales survey this morning in the UK, which largely came out as expected, showing a further decline in consumer spending due in part to a late Easter period and a rise in household utility bills. In addition, the UK Global Trade Balance is released this morning and forecasters are anticipating that the deficit for goods and services has widened to £5.8 Billion in February.
In the past 24hrs, the Euro has been given a boost following comments from the ECB's Klaus Liebscher that the central bank is likely to raise interest rates in June after the chairman, Jean-Claude Trichet, announced last week that rates would remain at 2.50% in May. We have some significant data released this morning in the Euro-zone with the German Investor's Confidence report expected to show a sharp increase to 65.0 in April from 63.4 last month.
With regards the Dollar, we continue to hold steady above 1.7400 this morning and without any significant data released in the States until tomorrow with the U.S. Trade Deficit, we don't anticipate too much market movement throughout the course of today. However, with the economy accelerating faster than anticipated in the first quarter, the 2006 U.S growth forecast may increase following a steady increase in consumer spending and household income.
The Dollar strengthens as the unemployement rate unexpectedly falls to 4.7% in March
The Euro weakened against the majors last week following the ECB's unexpected announcement that there is a 'high probability' interest rates will remain at 2.50% next month and we have traded towards 1.4400 against Sterling this morning following the release of worse than expected French Industrial production data. However, with the German Investor's confidence report due out tomorrow and set to show an increase in April, we can expect the euro to regain some of the losses of last week.
We have a significant week of ahead of us in terms of data released in the UK with the Unemployment rate set to show an increase in March with the number of Britons claiming benefits soaring to its highest level in almost 3 years. Forecasters are anticipating that the figures, released on Wednesday, will show a rise of 6,500 jobless claims in February to 926,000. Today, we have Producer Prices released in the UK and forecasters are anticipating that the figures may be hampered by rising manufacturers' costs due to higher oil prices.
The Dollar was buoyed on Friday afternoon following better than expected Nonfarm Payrolls data as the monthly job report showed that 211.000 jobs were added in the U.S in March with the unemployment rate marginally improved to 4.7% from 4.8% in February. As a result, the dollar strengthened against the majors as growth in the U.S labour market fuelled speculation that the Federal Reserve will lift interest rates again this month. There is some important data released in the States towards the middle of the week with the U.S. Trade balance expected to show a slight improvement last month from the record $68.5 Billion deficit in February.
The Euro weakens across the board as Trichet indicates the ECB won't be adjusting their interest rates in May
Sterling rallied against the majors yesterday with the release of UK House Prices rising for the eighth month in ten in March as the property market continues to show growth in the first quarter. As expected, the Bank of England kept UK interests rates at 4.50% and the ECB also revealed that their current monetary policy would remain at 2.50% in April. However, in the following press conference the ECB chairman, Jean-Claude Trichet, stated that there was a 'high probability' that interest rates won't be moved in May, which came as a surprise to the market and therefore the euro weakened across the board, closing last night above 1.4300 against Sterling.
The Dollar has come under pressure this week and we can expect further movement today with U.S. retailers expected to show the worst sales gains in over a year for the month of March but without doubt the most significant data released in the States today will be Nonfarm payrolls at 13:30 with many analysts expecting to see further growth in the U.S labour market. This figure has become increasingly significant in recent months, focusing on unemployment and average hourly earnings in the States and with forecasters predicting an improvement in March we could see the best first quarter of hiring in 6 years.
The Euro's looking strong ahead of the ECB interest rate announcement
Following better than expected unemployment data on Tuesday, the Euro was given another boost yesterday as PMI services in the euro-zone maintained February's highest level in 5 years at 58.2, giving further evidence of growth in the service sector. Coupled with that, Retail Sales in Europe rose 0.5% in February, which was in line with expectations but Sterling suffered further when UK Manufacturing unexpectedly fell for the first time in four months with factory production dropping 0.2% from January. As a result, we closed under 1.4300 last night and with the ECB announcement this afternoon, we could see further market movement throughout the course of the day. However, speaking from a strictly technical point of view, this market is now looking relatively 'over-sold' and therefore we may see a bounce upwards in the coming week.
Although the ECB are widely expected to hold interest rates this month, the accompanying press conference should provide the clearest indication yet whether a rise in Euro-zone interest rates will follow next month. In addition, the Bank of England also announce their latest stance on monetary policy this afternoon with forecasters anticipating a 'no change' in UK interest rates for the eighth month running as the central bank awaits more evidence of a pick-up in consumer spending.
With regards the Dollar, we traded down from 1.7600 yesterday on the release of better than expected ISM non manufacturing data, which suggested that the U.S. service sector has expanded more than anticipated in March. This afternoon in the States, we have weekly jobless claims figures released at 13:30 with forecasters predicting a slight rise to 305,000 from 302,000 the previous week.
Data Released 6th April
UK 12:00 Bank of England Rate Announcement
EUR 12:45 ECB Interest Rate Announcement followed by Press Conference
The Dollar closes above 1.7550 as speculation intensifies that the Fed are nearing the end of it's current rate cycle
In early trading yesterday, the Euro pushed higher against the majors as better than expected unemployment figures and strong inflation data push us ever closer towards the 1.4300 level. The euro-zone unemployment rate slipped to 8.2% in February against 8.3% the previous month and Producer Prices also increased in line with expectations, rising 0.5%. As a result, the data increased speculation that the ECB will raise interest rates again over the coming months with the next likely increase scheduled for May.
We also have some important data released this morning in the Euro-zone with PMI Services expected to match the five-year high of 58.2 in February, portraying further evidence of growth in the service sector. In addition, there is also Euro-zone Retail Sales data released today at 10:00 with forecasters anticipating a slight rise last month. Sterling may be given a boost this morning as Manufacturing probably expanded for a fourth month running due in part to a sharp increase in UK exports, which is expected to show a rise of 0.6% in January, narrowing the trade deficit to £5.73 Billion.
In the past 48hrs, the Dollar has continued to slip against Sterling and the Euro as rumours intensified that the Federal Reserve are nearing the end of it's current rate cycle. ISM Non Manufacturing is released in the U.S this afternoon and is predicted to show a slight rise in March but we can expect to see further dollar weakness today after closing last night above 1.7550.
The Dollar suffers a setback as Manufacturing expands at a much slower pace than anticipated
In the past 24hrs we have seen some significant market movement particularly with regards the Dollar as ISM Manufacturing, which many analysts were predicting would expand in March, came out at a much slower pace in the first quarter, due in part to rising prices and a fall in new orders. As a result, the Dollar fell roughly two points to open this morning above the 1.7400 level and without any significant data released in the UK or the States today, we can look towards the end of the week and Nonfarm Payrolls in the U.S as an indication of whether Sterling can capitalise further on relative Dollar weakness.
With regards the Euro, we continued to test the major support level at 1.4300 yesterday after PMI Manufacturing data in the Euro-zone expanded to its fastest pace in almost 5 years last month, fuelling speculation that the ECB will raise interest rates in order to counter inflation as economic growth begins to accelerate. The monthly index showed a rise to 56.1, the highest level since September 2000, from 54.5 in February.
There is some important data released today that is likely to affect the Euro with Producer Price Index for February set to show a 0.5% rise last month and we will be paying particular attention to the Unemployment rate, which is expected to be unchanged from January at 8.3%.
Sterling looking very bearish ahead of the BoE interest rate annoucement
Following on from Friday, Consumer Confidence in the UK unexpectedly fell last month, leading to concerns that the Bank of England may still have room to cut interest rates and Sterling was hampered further against the Euro after the EC Sentiment Index showed that confidence among European Executives and consumers rose to it's highest level in almost 5 years. On Friday afternoon, the Dollar was boosted on news that Personal Spending in the U.S. rose 0.1% in February and household income climbed 0.3%. Therefore, U.S Consumer Confidence rose quite dramatically to 88.9 from 86.7 in February due primarily to rising wages and the jobless rate being near it's lowest point in almost 4 years. In addition, Manufacturing rose more than anticipated last month as the U.S economy accelerated in the first quarter.
We have a significant week ahead of us in terms of data released and the focal point will be on Thursday when the ECB and the Bank of England announce their latest stance on monetary policy. Ahead of the announcement, the Euro is looking strong against the majors this morning and with the PMI surveys and the service sector expected to show a mild improvement in March, the ECB will be given plenty of justification in raising interest rates again.
In the UK, we have Manufacturing data released this morning, which forecasters are predicting to show a slight rise last month but the Bank of England are expected to keep interest rates at 4.50%, awaiting more evidence of a pickup in consumer spending and industrial production.
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