Daily Insight

There is a glut of significant data released today on both sides of the Atlantic and we can expect to see further market volatility after the Dollar fell significantly against the majors yesterday afternoon amid the appointment of Hank Paulson as the new U.S Treasury secretary and the release of Consumer Confidence data for the month of May, which showed that rising energy prices will point to weaker economic growth and slower spending in the second half of the year. The figure came in slightly above market expectations but still posted the biggest decline in eight months as the Conference Board's Index fell to 103.2 from the four-year high of 109.8 in April. The focal point of today in terms of U.S data released will be the minutes of the Federal Reserve's last policy meeting where investors will be looking for any clues that inflationary pressures will lead to policy makers raising interest rates again in the coming months.

There is a host of significant data released in the UK this morning with Nationwide House Prices showing only a modest increase of 0.2% in May and following the slowdown in prices last month, the UK housing market looks to be cooling after strong gains in the first quarter of the year. In addition, UK Consumer Confidence is widely expected to show a partial improvement in the last month. Higher utility bills and rising energy costs affect sentiment and this is reflected in the recent collapse of consumer credit, which posted the weakest growth in over 12 years in the figures released last month. it is anticipated that the data released this morning will remain weak. Finally, UK Mortgage Approvals are expected to slide further to 113,000 for the month of April compared with 120,000 just three months earlier as higher unemployment and sky-high property prices have discouraged first-time buyers.

With regards the Euro, there was some positive data released in the euro-zone yesterday as the M3 survey showed that money supply throughout Europe increased by the most in three years last month as economic growth fuelled a surge in loan applications, reinforcing concerns that the ECB will need to raise interest rates from the current 2.50%. There is some significant data released this morning in the euro-zone with French and German unemployment data widely anticipated to show a marginal improvement in the last month and therefore, European Consumer Confidence is expected to remain relatively unchanged in May.

Data Released 31st May

UK 07:00 Nationwide House Prices (May)
UK 09:30 Mortgage Approvals (April)
UK 09:30 Consumer Credit (April)
UK 11:00 Consumer Confidence (May)
UK 11:00 CBI Distributive Trades (May)

EU 10:00 Flash HICP (May)
EU 10:00 Sentiment Index (May)
- Industrial/Consumer Confidence

U.S 13:15 ADP National employment report
U.S 15:00 Chicago PMI (May)
U.S 19:00 FOMC Minutes - (10th May)

written by Adam Solomon

Following a quiet start to the week with the Bank Holiday, we can expect some market movement over the course of this week with a host of significant data released both in Europe and the States. The Euro made gains against the Dollar yesterday as German Consumer Confidence rose to the highest level in 5 years coming in at 6.8 for the month of June, which was well ahead of expectations and provides yet more evidence that economic growth is accelerating in the Euro-zone and will lead to the ECB raising interest rates again from the current 2.50%. There is some data released in Europe this morning with French unemployment and Spanish retail Sales both expected to show signs of modest growth in the last month.

Sterling has been boosted in recent weeks by a sharp pick-up in Manufacturing and Services, which has led to increased speculation that the Bank of England will need to lift interest rates towards the latter part of the year in order to keep inflation around the government's 2% target. However, it is widely anticipated that the BoE will maintain a cautious approach with regard a change in monetary policy as the MPC await further signs of an improvement in consumer spending. UK Consumer Confidence for the month of May, which is released tomorrow, is expected to show only a slight improvement in the last month as higher petrol costs and utility bills continue to harm sentiment. There is some data released this morning in the UK with Hometrack House Prices expected to remain relatively unchanged from the 0.6% increase in April.

The Dollar's erratic and volatile behaviour in past few weeks has largely been driven by a number of significant factors, not least the Fed's announcement that they are nearing the end of their current rate cycle, which has seen 16-consecutive rate rises in just under 2 years. However, the chairman of the Federal Reserve, Ben Bernanke, left the door open for further rate rises providing the data justified that inflation is accelerating faster than anticipated. Therefore, when the inflationary data released last Friday showed that Personal Spending had only risen 0.6% in April, speculation intensified that Fed policy makers will need to think about lifting rates again at their next meeting in June. As a result, the Dollar rallied significantly against the majors but that has been hampered this morning by suggestions that U.S Consumer Confidence, released this afternoon, declined to 101.5 in May from 109.6 the previous month led by a significant rise in petrol costs and rising interest rates.

Data released 30th May

UK 00:01 Hometrack House Prices (May)

EU 09:00 M3 / 3 Month Moving Average (April)

U.S 15:00 Consumer Confidence (May)

written by Adam Solomon

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

The Euro has been boosted against Sterling in the past week by some extremely positive data coming out of Germany and yesterday the single currency made further gains against Sterling as the Ifo Business climate index showed that confidence in Germany remains at a high level despite forecasters anticipating a decline in May following increasingly higher energy costs and the surging price of oil. The index, which is based on a survey of 7,000 executives, maintained the 15-year high from April and only dropped off to 105.6 from 105.9 last month with expectations for euro-zone exports to continue improving over the coming months and that's despite comments from the French Finance Minister indicating that the ECB wouldn't want the Euro to appreciate much more because exports would become to expensive for foreign investors.

Sterling weakened significantly against the majors yesterday off the back of some weaker than expected CBI data, which showed that manufacturers were less optimistic with monthly orders dropping to -12 in May despite forecasters anticipating a continued improvement this month from April as average price expectations for the next three months dropped to 0 but there was some positive news for the Pound as UK export orders reached the highest level in ten years. There is some important economic data released this morning with the second estimate for GDP in the first quarter and it is widely anticipated that UK inflation will remain unchanged from the first estimate at 2.2%.

With regards the Dollar, we witnessed some significant market movement yesterday as U.S Durable Goods Orders fell by more than expected for the month of April, dropping by 1.1% from March where orders showed the biggest two month increase since comparable records began in 1992. The sharp increase in fuel costs are seemingly having a visible effect on companies as they attempt to curb corporate spending with Orders for goods made to last falling by 4.8%, the biggest decrease since January. However, the Dollar climbed dramatically against the majors on the release of housing data in the States, which unexpectedly showed that Sales of New Homes increased by 4.9% in April to an annual rate of $1.198 million despite market expectations of a sharp decrease this month as rising U.S interest rates make mortgages less attractive for American consumers.

Nevertheless, there were 565,000 new homes for sale at the end of April, the highest ever recorded, and a seemingly buoyant labour market is sustaining demand for new homes, which flies in the face of higher mortgage rates. The policy makers at the Federal Reserve will be watching the housing market closely and yesterday's data has increased speculation that the Fed may continue it's two year cycle of interest rates rises as the economy continues to show growth. As a result, we have seen some renewed appetite for the Dollar, gaining 0.3% against Sterling to close under 1.8700 last night and there is some significant data released this afternoon in the States with the first quarter GDP deflator, which is widely expected to come in just under the Consumer Price Index last week at 0.2% and Sales of Existing Homes are also expected to decline in April.

Data Released 25th May

UK 08:30 GDP (Q1 Preliminary)

U.S 13:30 Initial Jobless Claims (w/e 20th May)

U.S 13:30 GDP (Q1 Preliminary Deflator)

U.S 15:00 Existing Home Sales (April)

written by Adam Solomon

The market remained fairly stagnant yesterday following a second successive day without any significant data released either in the UK or the States but we can expect some market movement over the course of the day with the CBI Monthly Trends survey released this morning and forecasters are anticipating a moderate improvement in May following a pickup in UK Manufacturing and Industrial Orders in the past month. Sterling may rally against the majors if the figure comes out slightly above market expectations and we will be focusing on the first quarter GDP data released tomorrow to give us an indication of whether growth in manufacturing and the service sector will be able to sustain the year-on-year growth rate at 2.2%.

In recent months, the cooling U.S Housing Market has come under pressure from the Federal Reserve's prolonged campaign to stem the threat of rising inflation by raising interest rates continually for the past 16-months as the economy grew at a much faster rate than anticipated. However, with U.S interest rates currently at 5% consumers are finding it increasingly difficult to afford a mortgage and that sentiment is reflected in the Sales of New Homes, which is expected to decline by as much as 6.4% last month. In addition, U.S Durable Goods Orders is also released this afternoon in the States and forecasters are anticipating a slight decline from the previous month as the gains in orders for February and March combined showed the biggest increase since comparable records began in 1992.

With regards the Euro, there is some significant data released this morning in Germany with the Ifo Index expected to show a moderate decline from the 15-year high in April as business confidence in Germany suffered, primarily due to a sharp rise in global energy prices and a significantly stronger currency. The Index rose to 105.9 last month, which was the highest level since 1991 and coupled with a dramatic rise in German Producer Prices last week, we can expect the Euro to show further strength if confidence in Europe's largest economy continues to remain at high level.

Data Released 24th May

UK 11:00 CBI Monthly Trends Orders (May)

GER 10:00 Ifo Business Climate Index (May)

U.S 13:30 Durable Goods Orders (April)

U.S 15:00 New Homes Sales (April)

written by Adam Solomon

Without any significant data released either in the UK or the States, the Dollar's dramatic decline resumed yesterday after what can be considered as an outright rejection of the new lows around the 1.8640 level and the Dollar promptly fell back to close above 1.8800. The recent volatility and lack of appetite for the U.S Dollar has primarily been driven by the Fed's decision to end it's current interest rate cycle, which has seen 16-consecutive rate hikes in the past 22-months. However, Bernanke did indicate that the FOMC wouldn't hesitate in lifting interest rates oncemore, providing the fundamental data released in the States supported the view of rising inflation and a growing economy. Therefore, the Dollar's volatile reaction to poor U.S data has been increasingly evident as the market's attention begins to focus on the U.S Trade and Current Account deficits. The market has already factored in a further rise in interest rates over the coming months but the data released has yet to validate this sentiment.

For a second day, there isn't any significant data released in the UK and we will turn our attention to the CBI Monthly Industrial Trends survey released tomorrow with forecasters anticipating continued improvement in May following a sharp increase in UK Manufacturing Output and Industrial Orders. Coupled with a rebound in Consumer Sentiment and Spending, the market is now anticipating that the Bank of England will need to lift interest rates at some point this year in order to keep inflation around the 2% target, a sentiment echoed in the minutes of the BoE's recent rate announcement with one policy maker voting for an increase in UK rates for the first time in nine months.

The Euro rose by 0.5% against the Dollar yesterday following the release of the European Trade Balance, which unexpectedly showed a surplus of €300 Million in March despite forecasters predicting that the deficit had increased by €2.5 million following an apparent slow-down in euro-zone exports. There is a plethora of data released this morning, most notably Industrial Orders for the month of March, which is widely anticipated to show an increase of 0.3% and GDP in Germany is expected to show that Europe's largest economy accelerated by 0.4% in the first quarter.

Data Released 23rd May

GER 07:45 GDP (Q1)

EUR 10:00 Industrial Orders (Mar)

written by Adam Solomon

Following on from last week, the Euro was given a boost on Friday with German Producer Prices rising by 1% month-on-month in April, which was largely in line with expectations, showing the biggest increase in nearly 24-years as global energy costs continue to soar. This week, the German ifo business climate survey is released tomorrow and forecasters are anticipating a slight decline in May from the 15-year high last month as the Euro's recent strength combined with market volatility and higher energy costs are expected to have a negative impact on business confidence. There is some significant data released this morning in the Euro-zone with the monthly trade balance expected to show that the deficit in goods and services has narrowed to €2.7 Billion in March.

In recent weeks, the Pound has made significant gains against the Majors as speculation continues to increase that the Bank of England will need to lift interest rates from the current 4.50% as the rising cost of oil and natural gas threatens to push UK inflation beyond the government's 2% target. In addition, the Minutes of the Bank's last policy meeting showed that the MPC was split 6-2 in favour of keeping interest rates on hold this month with David Walton, the only member to recommend a rise in rates in May. There is some fundamentally important data released this week as the first estimate for GDP growth came in at 0.6% quarter-on-quarter, taking the annual growth rate to 2.2% led by a sharp improvement in UK Manufacturing and the service sector but neither are expected to affect the second estimate released on Thursday.

Towards the end of last week, the Dollar made back some significant gains against the Pound and the Euro as the U.S Consumer Price Index showed that prices had risen by more than expected last month, increasing 0.3% from March, which fuelled speculation that the Federal Reserve will need to continue raising interest rates beyond the current 5% as inflation begins to accelerate. This week, the market will be looking for further indication that the U.S economy is accelerating faster than previously anticipated with the Fed's preferred measure of inflation published on Friday and the Core Personal Consumption deflator is widely expected to mirror the CPI by rising 0.3% last month, taking the year-on-year growth rate up to 2.2%.

Data Released 22nd May

EU 10:00 Trade Balance (Mar)

written by Adam Solomon

Sterling was given an unexpected boost yesterday with UK Retail Sales growing for a third month in April, jumping 0.6% from March and the year-on-year growth rate also rose to 3%, which was well ahead of market expectations. UK house prices gained 2% in the last month, the biggest increase in over 2 years and growth in wages managed to outpace inflation, which gave consumers more disposable income to spend on the highstreet. It is widely anticipated that the Bank of England will raise interest rates if economic expansion begins to accelerate in the latter part of the year and if Consumer Spending, which counts for two thirds of the economy, continues to show improvement despite increasingly higher utility bills and petrol prices, the BoE will be justified in lifting interest rates from the current 4.50%. There is some data released in the UK this morning with the PSNCR for April, which analyses the public sector net cash requirement and forecasters are anticipating the figure to show a marginal increase from March.

After a fairly quiet day yesterday, there is some significant data released in the Euro-zone this morning with German Producer Prices widely expected to show the biggest year-on-year increase since June 1982 primarily due to higher energy bills, which have risen 20% in the last year alone, and the rising cost of raw materials. In addition, French GDP data is released this morning with forecasters anticipating that the economy grew by 0.6% in the first quarter and Italian Industrial Orders is also expected to show some improvement in March.

Over the course of this week, speculation has been building that the Federal Reserve will continue raising U.S Interest Rates after a recent government report showed that inflation is accelerating faster than anticipated and producer prices have also risen significantly in the last month, prompting fears that the Fed will add to 16-consecutive rates rises in their next scheduled meeting on June 29th. In their last policy meeting, the Fed chairman, Ben Bernanke, indicated that a change in monetary policy was on the horizon but he also left scope for future rate rises providing the data supported the view of rising inflation. However, the data released yesterday showed that U.S Leading economic Indicators unexpectedly declined in Apil, providing evidence that higher interest rates and rising petrol costs are having a damaging effect on the housing market, consumer confidence and personal spending. The Dollar has gradually come back towards the significant support level at 1.8750 this morning and a break below here could signal further gains towards the major support at 1.8500 as the market looks to consolidate following the biggest move since Hurricane Katrina hit U.S shores last September.
Data Released 19th May

UK 09:30 PSNCR (April)

EU 10:00 Trade Balance (Mar)

GER 07:00 Producer Price Index (April)

written by Adam Solomon

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

In recent weeks, the Euro has made significant gains against the Dollar as speculation has intensified that the ECB will lift interest rates from the current 2.50% as the euro-zone economy begins to gain momentum. However, the data released yesterday has cast some doubts over this as the ZEW survey, which focuses on economic sentiment in Germany, showed that investor's confidence had dropped sharply this month to 50.0 from 62.7 in April due in part to a sharp rise in global energy prices. The Euro may come under further pressure today with euro-zone Industrial Production data expected to show a 0.2% drop in April from 3.2% in March and the Core measure for inflation in the euro region is widely anticipated to remain unchanged at 1.4%.

There was some significant data released in the UK yesterday as the Consumer Price Index showed that inflation accelerated in April, coming out in line with the government's 2% growth target following a drop to 1.8% in March. Consumer Prices rose by 2% year-on-year in May, which was largely in line with expectations, as prices gained 0.6% from March, the biggest increase since May 2001. The Minutes of the Bank of England's May meeting are released this morning with Stephen Nickell, the only MPC member to vote for a cut in interest rates, expected to continue his recommendation despite forecasts for higher inflation in the UK. The focal point of today in terms of data released will be UK unemployment and average earnings at 09:30 this morning with forecasters expecting a rise of 3% in April while headline earnings growth may give Sterling a boost if the figure comes out in excess of 4.2% in the first three months to March.

With regards the Dollar, there was a real mixed bag of data in the States yesterday as the Producer Price Index showed that U.S Wholesale Prices jumped by 0.9% in April but excluding food and fuel, Core prices only rose by 0.1% from March, which is under market expectations and supported the Fed's view that inflation is under control and therefore provides justification in keeping interest rates on hold. In addition, the Dollar was hampered further when U.S housing data showed that builders had begun work on the fewest new homes since November 2004, providing yet another indication of a cooling housing market in the States as increasingly higher interest rates have dampened demand. We have been anticipating a period of consolidation for the Dollar in recent days but this morning we have resumed the upward movement towards the 1.9000 level and we can expect further market movement throughtout the course of today. There is some significant data released in the States with the Consumer Price Index expected to jump by the most in three months in April but excluding record high petrol costs, Core Prices may only rise by 0.2%, which is under market expectations and 0.1% down from March.

Data Released 17th May

UK 09:30 BoE Minutes of May Meeting

UK 09:30 Unemployment (April)

UK 09:30 Average Earnings (3 months to March)

EU 10:00 Consumer Price Index (April)

EU 10:00 Industrial Production (March)

U.S 13:30 Consumer Price Index (April)

written by Adam Solomon

It is beginning to look increasingly likely that the recent Dollar decline is looking overly exaggerated and therefore, we can expect a correction to take place at some point over the coming weeks with many analysts arguing that fair value for the currency is priced around the 1.80 - 1.84 levels. Further evidence of this was provided in trading yesterday as metal prices dropped significantly from the dizzy heights of last week with Zinc suffering it's biggest loss in over 16 years and Copper declined by the most since October 2004. Despite U.S Capital Inflows coming out lower than expected at $69.8 billion, the figure was largely ignored as the Dollar rebounded sharply against Sterling, gaining 0.5% by the close of trading and 0.7% against the Euro. After a fairly quiet day in terms of data released, there is some significant U.S data out today with the Producer Price Index expected to increase by 0.1% in April but the figures could be affected by rising oil and energy costs. In addition, the Housing market is expected to decline further in the last month with the production of new homes dropping to 1.95 million from 1.96 million in March while U.S Industrial Production is widely anticipated to drop by 0.1% in April.

With regards the Pound, the UK Housing market is expected to remain fairly buoyant in the figures released for March today as ODPM House Prices are expected to rise by 0.4% from the previous month and the UK Consumer Price Index is widely anticipated to show robust growth in April, rising by 0.4% with the year-on-year growth rate unchanged at 2.6%. There has already been some housing data released this morning in the UK with the Royal Institute of Chartered Surveyor's survey, which reported that house prices rose for a sixth consecutive month in April, fuelled by increasing demand for larger homes.

Without any significant data released in the Euro-zone yesterday, the market remained fairly stagnant but today there is the release of the ZEW survey, which analyses German economic sentiment and it is widely expected to show a moderate decline this month from 62.7 in April as the rise of global oil prices begin to weigh on the economy.

Data Released 16th May

UK 09:30 ODPM House Prices (Mar)

UK 09:30 Consumer Price Index (April)

GER 10:00 ZEW Expectations Balance (April)

U.S 13:30 Producer Price Index (April)

U.S 13:30 Housing Starts (April)

U.S 14:15 Industrial Production (April)

written by Adam Solomon

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)

We had a plethora of significant data released yesterday both in Europe and the States as the Dollar reacted violently to weaker than expected Retail Sales data and dropped sharply to trade at 1.8900 this morning, yet another yearly low against Sterling. Following on from robust growth in Sales in March, forecasters were anticipating a monthly increase of 0.5% in April but discounting inflated petrol prices, retail sales actually rose just 0.1%, which is a clear indication that the U.S economy is beginning to slow-down into the second quarter. In addition, the weekly job report on unemployment claims totalled 324,000 first time claims last week, down 1,000 from a week earlier. There is some significant data released this afternoon in the States with the U.S Trade Balance expected to show that the deficit has widened sharply in March with forecasters predicting an increase to $67.2 Billion and we can expect the Dollar to decline further if the figure comes out in excess of market expectations.

Yesterday, the Pound continued to strengthen against the majors with UK Manufacturing Output expanding at the fastest pace in 11 months, rising 0.7% from February, which was way above forecasts of a 0.2% month-on-month increase. In addition, Industrial Production was also up 0.8% in March, which is the highest level in almost 6 years against expectations of a 0.2% gain. As a result, Sterling rallied vigorously with speculation intensifying that the Bank Of England will need to raise interest rates as the UK economy gathers momentum.

The Euro was boosted yesterday with Gross Domestic Product showing support that the euro-zone economy is accelerating faster than previously anticipated, expanding 0.6% in the first quarter following disappointing data in the last three months of 2005 and provided further ammunition for the ECB to lift interest rates to 3.5% by the end of year. The Euro rose to yet another yearly high against the Dollar yesterday and we have now seen a near 5% increase since mid-April alone, closing around 1.2900 last night.

Data Released 12th May

GER 07:00 Final Consumer Price Index

U.S 13:30 Trade Balance (Mar)
- Export Prices
- Import Prices

U.S 14:45 Michigan Sentiment

written by Adam Solomon

The beleaguered U.S Dollar was given some respite last night as the Federal Reserve lifted interest rates for the 16th month in succession and gave the greenlight for further rate rises in the future but only if the economic data supports the view that the U.S economy is accelerating faster than expected. It was widely anticipated that the Fed would pause at 5% interest rates but the statement last night curiously omitted the comments from Ben Bernanke two weeks ago, in which he gave the clearest indication he could that the current rate cycle was coming to an end. In addition, the U.S Treasury decided against naming China as a 'currency manipulator' and instead expressed strong disappointment in Beijing's current inflexibility on their exchange rate. It can be argued that the U.S Treasury desire a weaker Dollar in order to make exports more attractive and therefore lower the ever-increasing Trade Deficit, which is released tomorrow and is expected to have widened significantly from February. There is some significant data released in the States this afternoon with Retail Sales expected to show further signs of growth, jumping 0.8% in April, which is the biggest sales gain in three months and Business Inventories is also released today with forecasters predicting a rise of 0.4% in March.

In the past 24hrs, the Pound has dropped off against the majors despite the UK Trade Deficit narrowing for the first month since October last year following a pick-up in UK exports and rising oil prices. However, the Bank of England lowered it's economic growth forecast for 2007 in an inflation report released yesterday, raising speculation that interest rates will need to be lifted by 0.5% in order to combat the threat of inflation coming in higher than the government's 2% target. There is some important data released this morning in the UK with Industrial Production and Manufacturing Output expected to show further signs of improvement with forecasters predicting a rise of 0.6% in March as the UK economy accelerated in the first quarter to its fastest pace in over a year.

With regards the Euro, economic growth in Germany came in lower than expectations, rising 0.4% in the first quarter due in part to extended wintry conditions, which have so far hampered production in Europe's largest economy. The ECB monthly bulletin is published in the Euro-zone this morning and following Jean-Claude Trichet's comments last week regarding future monetary policy, we will be looking for further evidence that the central bank will increase borrowing costs next month.

Data Released 11th May

UK Chancellor Brown Testifies to Treasury Committee

UK 09:30 Industrial Production (Mar)

- Manufacturing Output

EU 10:00 Flash GDP (Q1)

U.S 13:30 Retail Sales (April)

U.S 13:30 Business Inventories (Mar)

U.S 13:30 Initial Jobless Claims (w/e 29th April)

written by Adam Solomon

The theme continued yesterday as the seemingly defenceless U.S Dollar slumped once again, hitting a new 28-year low against the Canadian Dollar and falling to yet another yearly low against the Euro, despite positive data coming out of the States with Wholesale Inventories increasing by 0.5% in March. However, it can be argued that the Dollar's still reeling from weekend reports that Iran are planning to begin trading oil in Euros, which echoes the recent sentiment felt in Russia and in Norway. With the FOMC rate announcement this afternoon, the Dollar may be given some respite as the Fed are widely expected to raise interest rates for the 16th consecutive month in under two years but speculation has increased this week that the government will begin to ease monetary tightening and pause at 5%. In addition, the U.S Treasury Budget for April will be released this evening and forecasters are anticipating that the government will stop just short of naming China as 'currency manipulator.'

Sterling has been boosted in the past week by pick-up in Manufacturing and Industrial Production in the UK and the BRC Retail Sales report has also been showing growth in the last month, jumping to 2.6% year-on-year in April, despite higher unemployment and rising oil and gas prices. There is some significant data released this morning in the UK with the Bank of England Inflation report expected to show signs of growth in the first quarter, which will lead to further speculation that the BoE will need to raise interest rates at some point this year.

The economic data coming out of Germany has looked increasingly positive in recent months but German exports unexpectedly declined by more than anticipated in March as the Euro strengthened, putting off potential investors and German Industrial Production also had the biggest drop in almost seven years despite expectations of a 0.6% increase month-on-month from February. However, it was widely anticipated that growth forecasts would be affected in Germany following extended strikes in the public service sector.

Data Released 10th May

UK 09:30 Global Trade Balance (Mar)

UK 10:30 BoE Quarterly Inflation Report

U.S 19:15 FOMC Rate Announcement

U.S 21:00 Treasury Budget (April)

written by Adam Solomon

In the past 24hrs, Sterling has extended its biggest weekly gain against the Euro since December last year as UK Factory-gate prices rose by the most in seven months in April. Ahead of the UK inflation report tomorrow, speculation has continued to grow that the Bank of England
will need to lift interest rates in the coming months as growth in the service sector and manufacturing industry begins to accelerate. UK output prices rose for the fourth consecutive month in April and grew 0.6% from March. Coupled with that, Industrial Production is also expected to rise by 0.2% in a report released on Thursday and the UK service sector has expanded at its fastest pace in more than two years. There has been some significant data already released this morning in the UK with the British Retail Consortium's monthly report on Retail Sales, which is expected to remain relatively robust following a 1.6% increase in March despite consumer's suffering higher utility bills and the UK unemployment rate being at it's highest level in almost 3 years.

The Euro continues to thrive following the ECB press conference last week and we can expect further evidence that the euro-zone economy is beginning to gain momentum into the second quarter as German Factory Orders rose significantly year-on-year in March, increasing to 12.4% from 10.6% in February. In addition, German Industrial Production, released this morning, is also predicted to show improvement with forecasters anticipating a rise from 6.4% in February to 7% in March.

In recent weeks, the Dollar has declined dramatically, dropping from 1.7250 this time last month to trade above 1.8700 as the high following the U.S job report last Friday. Since the Federal Reserve chairman, Ben Bernanke, gave the biggest hint yet that interest rates will be held after two more rises, the Dollar has been in rapid retreat and we can expect the market to focus on other aspects of the economy once the current rate cycle comes to an end. The U.S Trade Balance is released this Friday and forecasters are predicting that the Deficit has widened to $67.3 Billion for the month of March as imports continue to rise following record oil prices in the last month.

Data Released 9th May

UK 00:01 British Retail Consortium Sales Survey (April)

GER 11:00 Industrial Production (Mar)

U.S 15:00 Wholesale Inventories (Mar)

written by Adam Solomon

The recent decline of the Dollar continued on Friday as a government report showed that the U.S economy added fewer jobs than expected in April, which further increased speculation that the Federal Reserve will raise interest rates just twice more before pausing at 5.25%. Nonfarm Payrolls, a monthly figure released on Friday afternoon, showed that 138,000 jobs were added last month against the revised 200,000 in March, the lowest since October last year with unemployment remaining steady at 4.7%. As a result, the Dollar dropped to new yearly highs against the majors, closing around 1.8700 against Sterling and above 1.2700 against the Euro. In recent weeks, the Fed chairman, Ben Bernanke has given the clearest indication yet that the current rate cycle of 15-consecutive rises in little under 2 years is coming to an end but when the Federal Reserve meet this Wednesday it is widely anticipated that interest rates will be lifted another quarter-point to 5.00%.

Sterling has enjoyed a decent rally over the past two weeks as evidence begins to build that UK manufacturing is starting to see some improvement and with Industrial Production, released on Wednesday, expected to show a sharp rise from the 1.5% decline in February, speculation will intensify that the next move for the Bank of England will be a rise in interest rates from the current 4.50%. With the BoE's inflation report also released on Wednesday, expected to be more upbeat in terms of growth in March and coupled with higher oil prices, the Bank of England will need to raise rates in order to keep inflation in check. There is some significant data released this morning in the UK with the Producer Price Index expected to show a modest rise in April from 0.3% in March.

As the Euro-zone economy continues to strengthen into the second quarter of 2006, the Euro has made significant gains in recent weeks, amid speculation that the ECB will need to lift interest rates in the coming months from the current 2.50%. Jean-Claude Trichet, the chairman of the central bank gave a press conference last week following the rate announcement, which as widely anticipated left interest rates unchanged this month. However, Trichet gave the clearest indication yet that interest rates will rise next month as the year-on-year growth rate accelerates from 1.8% to 2%.

Data Released 8th May

UK 09:30 Producer Price Index (April)

GER 11:00 Factory Orders (March)

written by Adam Solomon

Following on from yesterday and the Euro received a significant boost as the ECB convened to announce their latest policy on euro-zone interest rates. As widely expected, Jean Claude Trichet, the chairman of the ECB, kept interest rates on hold at 2.50% in May but in the following press conference he gave the clearest indication yet that interest rates will be lifted next month following faster economic growth in the first quarter and rising energy prices. There was also some significant data released in the euro-zone yesterday as European Service industries grew at the fastest pace in more than five years in April despite a modest decline expected from March. However, the obvious improvement in the labour market did little to improve Retail Sales, which is only 1.3% higher year-on-year in February and the figures released yesterday were largely in line with expectations showing a 0.1% rise in March.

Sterling has enjoyed a decent rally this week after the release of better than expected Manufacturing data on Tuesday and House Prices look to have risen sharply in April showing a rise of 2% from March. The Bank of England's monetary policy committee announced yesterday that UK interest rates would remain at 4.50% following higher unemployment and weak consumer sentiment. This is the ninth month running that the MPC have left interest rates on hold as inflation dipped below the government's 2% target.

With regards the Dollar, U.S first quarter Productivity rebounded in the first quarter, rising to an annual rate of 3.2% following the first decline in over 4 years in the last quarter and was slightly up on market expectations. However, Productivity gains failed to stay in touch with rising wages and increased benefits raising concerns that the Federal Reserve will need to continue raising interest rates in order to keep inflation in check. There is some very significant data released in the States this afternoon with Nonfarm Payrolls expected to show a moderate decline in April but Average earnings are set to rise to 0.3% from 0.2% in March and the unemployment rate is expected to remain relatively unchanged at 4.7%.

Data Released 5th May

U.S 13:30 Non Farm Payrolls (April)

U.S 20:00 Consumer Credit (Mar)

written by Adam Solomon

Following on from yesterday, the Euro rallied on the release of better than expected unemployment data in the Euro-zone, which showed a slight improvement in March, dropping to 8.1% from 8.2% in February. Coupled with a seemingly buoyant labour market, the Euro-zone service sector PMI is released this morning and forecasters are predicting a sharp rise from 58.2 in March, which was well below market expectations. In addition, Retail Sales is expected to show only a modest rise in March of 0.1% following a 1.3% year-on-year increase in February but the ECB Interest Rate announcement at midday today will give us the clearest indication yet that euro-zone interest rates will be lifted next month.

We have a plethora of significant data released today both in the UK and in Europe with the Bank of England Rate announcement at midday and it is widely anticipated that the MPC will keep interest rates on hold at 4.50% as the BoE wait for further evidence of a pick-up in consumer spending. In addition, the number of mortgage approvals are expected to rise to the highest level in almost two years in March, up 33% year-on-year as the UK housing market continues to thrive and the PMI Service Sector is also expected to show a modest improvement in April following the worst UK unemployment figures in 3-years.

There was some positive news for the Dollar yesterday as the ISM's index for Non-manufacturing rose to 63.0 in April from 60.5 the previous month despite many analysts predicting a decline last month. In addition, U.S Factory Goods Orders also unexpectedly rose by 4.2% in March and with Non Farm Payrolls released tomorrow the Dollar may be given a further boost as the U.S labour market continues to look robust.

Data Released 4th May

UK 08:30 Consumer Credit (Mar)
- Mortgage Approvals

UK 09:30 CIPS Service Survey (April)

UK 12:00 BoE Rate Announcement

EU 09:00 PMI Services (April)

EU 10:00 Retail Sales (Mar)

EU 12:45 ECB Interest Rate Announcement followed by Press Conference at 13:30

U.S 13:30 Initial Jobless Claims

written by Adam Solomon

There was some significant data released in the UK yesterday with Business Optimism rising to its highest level in almost a year as the CIPS Manufacturing Index jumped to 54.1 in April against 50.8 last month and was well ahead of market expectations. As a result, Sterling strengthened significantly against the majors, closing above 1.4500 last night against the Euro. In addition, UK economic growth will accelerate in the second half of the year according to a survey focusing on Business Confidence, which predicts that growth will rise to 3.4% in the third and fourth quarters compared with 2.4% at the same stage in 2005. The BDO's latest business trends report suggests that inflation will come in at 2.2% in the latter part of the year, above the treasury's 2% target, signalling higher interest rates.

Ahead of the ECB rate announcement and press conference tomorrow, the Euro received a boost yesterday with PMI Manufacturing data proving stronger than expected following a sharp increase in output and new orders in the last month. There is some important data released this morning with Euro-zone unemployment expected to remain at 8.2% in March, a three and a half year low, and the Producer Price Index is also predicted to be relatively unchanged last month.

We have seen the Dollar decline significantly over the past week and we continued to trade upwards yesterday despite Ben Bernanke's vain attempts to convince the market that his comments last week regarding future monetary policy were 'misunderstood'. Nevertheless, the Dollar continued to weaken, closing above 1.8400 last night and with the U.S service sector survey expected to show a modest decline in April, we can expect further movement today.

Data Released 3rd May

EU 10:00 Unemployment Rate (Mar)

EU 10:00 Producer Price Index (Mar)

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

U.S 15:00 ISM (Non Manufacturing) Index (April)

written by Adam Solomon

Despite an abundance of strong U.S data in the past week, the Dollar continued to decline through Friday after first quarter GDP data showed that the U.S economy had expanded to an annual rate of 4.9%, the fastest in almost 2 years. However, PMI Manufacturing showed a slight decline of 0.1% in April and as a result, the Dollar plunged to new yearly lows against Sterling and the Euro, closing above 1.8200 and 1.2600 respectively. The Dollar has been severely weakened since Ben Bernanke, the chairman of the Federal Reserve announced last week that the Fed are nearing the end of its current rate cycle after 15 consecutive hikes in almost 2 years. However, yesterday reports began to filter through from CNBC news that Bernanke had claimed that he was misquoted and the market had misunderstood his comments, raising speculation that the Fed were not yet finished in raising interest rates.

There is some significant data released in the UK today with the CIPS Manufacturing survey expected to show some form of improvement in April with forecasters anticipating a rise to 51.2 from 50.8 last month. In addition, the CBI Distributive Trades Survey, released this morning, will give a good indication of the economy in terms of Consumer Spending and the Bank of England will also announce their latest stance on UK interest rates this week with the MPC expected to hold interest rates at 4.50% following UK GDP growth coming in around trend levels for the first quarter.

With regards the Euro, the ECB also meet this Thursday where Jean-Claude Trichet is expected to leave interest rates in May but we will be paying particular attention to the following press conference where we will be looking for the clearest indication yet that Euro-zone interest rates will be lifted in June. There is some important data released this morning, which may have an affect on the Euro with PMI Manufacturing expected to continue rising in April to 56.7 from 56.1 the previous month.

Data Released 2nd May

UK 09:30 CIPS Manufacturing Survey (April)

UK 11:00 CBI Distributive Trades Survey (April)

EU 09:00 PMI Manufacturing (April)

written by Adam Solomon