Daily Insight

For the first time this week, there was a glut of significant data released on both sides of the Atlantic yesterday with the Pound coming under further pressure, particularly against the Dollar, despite the release of the Nationwide house price index, which showed that prices only rose by 0.3% in June with the year-on-year growth rate accelerating 5% in the past month. In addition, a report from the Bank of England showed that UK mortgage approvals actually rose considerably in May, coming in at 117,000, which was well above expectations and well in excess of 106,000 in April. However, with the Federal Reserve raising their benchmark interest rate for the seventeenth month in succession, the Pound has been under continued pressure in the last week but some relief may be in sight this morning with UK consumer confidence set to show a marginal improvement in the last month, primarily due to increased sales of England football shirts and high-definition televisions in preparation for the World Cup. Elsewhere, UK Gross Domestic Product is expected to remain relatively unchanged with the annual growth rate at 2.2%, slightly ahead of the government's target.

The Euro has been heavily boosted this week after a string of positive economic data has led to fresh calls for the ECB to be more aggressive with regard monetary tightening and lift interest rates again before the next scheduled rise in August, with several members of the governing council publicly announcing their recommendation for higher rates. There was some significant data released in the Euro-zone yesterday with German unemployment falling for a third consecutive month in June and M3 money supply growth reached the highest level in 3 years for the 12 countries supporting the Euro, which strengthens the case for the central bank to continue lifting interest rates. The Euro has pushed under 1.4500 against the Pound and we may see further gains this morning with the EU Sentiment Index expected to remain high, particularly after business confidence in Germany reached the highest level in 15-years earlier this week.

The Dollar has been gaining in recent weeks in the build-up to the FOMC rate announcement where the Federal Reserve were widely expected to raise interest rates by another quarter-point to take them upto 5.25%. Last night, the Fed did indeed raise interest rates by 25 basis points but the language used in the accompanying statement differed from previous months. The FOMC declared that Productivity is holding unit labour costs in check but they remain vigiliant on inflation, saying that some inflation risks remain and that it has been elevated in recent months. Therefore, it looks increasingly likely that the Fed will lift rates once again in the coming months although the Dollar reacted surprisingly to the news, dropping back above 1.8200. There was some important inflationary data released yesterday in the States as Gross Domestic Product showed that the U.S economy expanded at a much faster rate than anticipated, rising to 5.6% in the first quarter, led by a surge in consumer spending that has since been muted by higher energy costs. Elsewhere, the weekly jobless figures were released and the number of claims made in the past week rose to 313,000. There is some hugely significant inflationary data released this afternoon with Personal Income and Expenditure, the Fed's preferred measure of inflation, widely expected to show a modest drop of 0.3% in May.

Data Released 29th June

UK 09:30 Final GDP (Q1)
UK 09:30 Current Account Balance (Q1)
UK 10:30 Consumer Confidence (June)

EU 10:00 Flash Consumer Price Index (June)
EU 10:00 Sentiment Index (June)
- Business / Consumer Confidence

U.S 13:30 Personal Income / Expenditure (May)
- Core PCE
U.S 14:45 Final Michigan Sentiment (June)
U.S 15:00 Chicago PMI (June)

written by Adam Solomon

The lack of appetite for the Pound continued yesterday despite the relatively positive CBI Distributive Trades Survey, which maintained it's 18-month high in June as the net balance of 9 percentage points was the same as last month and the highest since December 2004. The apparent pick up in UK retail sales may prove significant in deciding monetary policy with the Bank of England expecting economic expansion to gather momentum in the second half of the year, particularly since the cut in interest rates last August had a positive effect on consumer spending, which accounts for two thirds of the economy. There is some important UK data released this morning with the nationwide house price index widely anticipated to show continued signs of growth in the housing market while elsewhere the BoE's monthly report on mortgage approvals is expected to show a modest increase in May, jumping to 110,000 from 106,000 in April.

The Euro has been gaining in recent weeks thanks largely to renewed calls from several members of the ECB to act more aggressively to monetary tightening, which has led to speculation that the central bank will lift interest rates again before the next scheduled rise in August. However, the market was fairly quiet yesterday amid a sparse supply of economic data released but we can expect to see some movement in the figures this morning with the Euro-zone M3 money supply expected to show continued signs of growth in May from 8.8% the previous month while elsewhere German unemployment is predicted to be unchanged in June at 11.0%.

Yesterday afternoon, the Dollar continued to strengthen further against the Pound and closed around 1.8150 last night as we draw nearer to the FOMC rate announcement this evening. It is widely anticipated that the Federal Reserve will lift borrowing costs by 25 basis points for the 18th month in succession. However, there has been calls for a more aggressive tightening of U.S interest rates from some sectors and it will be interesting to see if Ben Bernanke indicates that a further change in policy is on the horizon. Therefore, the inflationary data released this afternoon in the States will undertake added significance and it will be interesting to see if U.S Gross Domestic Product in the first quarter has continued to gather momentum. The Fed's preferred measure of inflation is released tomorrow with the Core PCE deflator, which is widely expected to rise by 0.2% in May, leaving the year-on-year growth rate unchanged at 2.1%.

Data Released 28th June

EU 09:00 M3 / 3 Month Moving Avg (May)

UK 09:30 Mortgage Approvals BoE (May)
UK 07:00 Nationwide House Prices (June)

GER 08:55 Unemployment (June)

U.S 13:30 Initial Jobless Claims (w/e 24th June)
U.S 13:30 GDP / Deflator (Q1 Final)
U.S 19:15 FOMC Rate Decision

written by Adam Solomon

The Euro remained relatively unchanged against the Pound yesterday despite German business confidence jumping to the highest level in 15-years, which provided yet further evidence that the ECB will need to lift interest rates as economic growth accelerates. The Ifo institute in Munich released it's June confidence index, which actually rose to 106.8, the highest level since July 1991 despite forecasters anticipating a slight decline to 105.0. German companies have seemingly continued to increase investment even as the euros 6% gain against the dollar this year makes their goods less attractive to foreign investor's and near-record oil prices have also added to costs. In addition, for the second day in succession a member of the ECB's governing council has publicly announced his concerns over rising inflation. The comments from Nicholas Garganas have fuelled speculation that the central bank will be more aggressive with regard monetary tightening and he even speculated that the ECB could raise interest rates by more than 25 basis points over the coming months.

For a second consecutive day, there was no significant UK data released and the Pound has looked fairly stagnant in the market this week, dropping further against the Euro to trade well underneath 1.4500. However, there is some potentially positive data released this morning with the CBI Distributive Trades survey widely expected to show continued signs of growth in high-street trade this month as sales of England football shirts and big screen televisions peak in preparation for the World Cup. A significant pick-up in consumer confidence will undoubtedly lead to fresh calls for higher UK interest rates, which have been the topic of debate recently, particularly in the aftermath of David Walton's untimely death.

The U.S Dollar has enjoyed a decent rally over the past couple of weeks, particularly against the Pound as we continue to trade around the 1.8200 level in the build up to the FOMC rate announcement tomorrow. The Federal Reserve are widely expected to lift interest rates by a further 25 basis points to take their benchmark rate upto 5.25%. However, their was a degree of uncertainty in the market yesterday as the Dollar reacted curiously to some positive economic data. U.S consumer confidence unexpectedly rose by more than forecast in June as an improvement in the labour market bolstered spending. The threat of higher interest rates and rising petrol costs have seemingly undeterred the American consumers although rising confidence may have a negative effect on consumer spending and therefore reduce the pace of economic growth this year. Elsewhere, sales of existing homes in the U.S fell to the lowest level since January this year, dropping by 1.2% to take the annual rate to 6.67 million, primarily due to higher mortgage rates.

Data Released 28th June

UK 11:00 CBI Distributive Trades Survey (June)

written by Adam Solomon

Following a relatively quiet day in terms of economic data released, the Euro made further gains against the majors after several members of the European Central Bank publicly gave their support for a further tightening of monetary policy before the next scheduled rise in August. In the past 24hrs, two members of the ECB's governing council have declared that global inflationary pressures will force the central bank to lift euro-zone interest rates above the current 2.75% with Yves Mersch enforcing the view that the ECB may raise rates by upto 50 basis points. There was increased speculation that the ECB would adopt the same policy in their June announcement and as we know when Jean Claude Trichet adopted a more cautious approach and lifted interest rates by just 25 basis points, the Euro was severely weakened, trading upto 1.4650 against the Pound. However, as a result of these comments the Euro firmed 0.3% against the Dollar and was also up by 0.3% versus the Pound at the close. There is some significant data released this morning in the Euro-zone with the German ifo Business climate index, which is expected to continue showing signs of growth in June with the staging of the World Cup likely to provide a timely boost.

The negative sentiment surrounding the Pound has continued in the beginning part of this week with the Hometrack House Price index rising 0.8% in June, which was largely in line with expectations but it seems higher unemployment and rising energy costs are having a negative impact on the housing market with UK mortgage approvals set to drop significantly in May. There is a sparse supply of important data released until Wednesday this week with the CBI Distributive Trades Survey, which is widely expected to show further signs of growth in high-street trade this month and will add weight to calls for higher UK interest rates.

The Dollar's recent surge against Sterling continued yesterday after sales of new homes in the U.S unexpectedly rose to the highest level this year in May as prices tumbled in a market saturated with unsold homes. Purchases increased by 4.6% to an annual rate of 1.234 million, which was well ahead of market expectations and as a result the Dollar briefly pushed under 1.8200 against the Pound. The Federal Reserve has always monitored the U.S housing market closely and this figure will do little to ease concerns that rising interest rates are having a cooling effect on the market. There is some significant data released this afternoon in the States with U.S Consumer Confidence widely expected to decline further in June as a result of higher petrol prices and slowing economic growth. In addition, Sales of Existing Homes will provide a more complete picture of the U.S housing market and forecasters are predicting a slight decline in the figures released for June.

Data Released 27th June

GER 10:00 ifo Business Climate Index (June)
GER 10:00 Consumer Confidence (June)

U.S 13:30 Existing Home Sales (May)
U.S 13:00 Consumer Confidence (June)

written by Adam Solomon

Following on from last week, the Dollar continued to rally against Sterling ahead of the FOMC rate announcement this Thursday and we touched new lows towards the latter part of the week, briefly trading under 1.8200 for the first time in two months. Following the untimely death of MPC member David Walton last week, the Pound has come under some intense pressure and the Dollar was given a further boost on Friday as orders for U.S durable goods excluding transportation rose 0.7% in May. This goes some way to ease concerns that higher interest rates are beginning to have a cooling effect on the U.S economy. We have a string on significant data released in the States this week and as I mentioned, the Federal Reserve will convene on Thursday to announce their latest move towards monetary tightening with many investors pricing in a quarter-point jump to 5.25% with a 50:50 chance of a further rate rise next month. There is some important data released this afternoon with New Home Sales widely anticipated to decline to 1.16 million in May as the threat of rising interest rates and higher mortgages discourage first time buyers.

The Pound has been struggling in the past week particularly since the death of David Walton, which has left UK interest rate expectations severely muted in the short term and with a light calendar this week in terms of UK economic data released, Sterling may come under further pressure against the majors as we trade down towards that significant level at 1.4500 versus the Euro. There is some UK data released on Wednesday with the CBI Distributive Trades survey and UK consumer confidence on Friday, which is expected to show a slight decline in the figures released for June.

The Euro has been steadily gaining against the Pound in the past week or so and we have a significant week ahead of us with the German ifo business climate index released tomorrow and investors are anticipating a strong figure with the consensus forecast suggesting the index dropped slightly in June from the cyclical high last month. The focal point of this week in terms of data released in the euro-zone will be the flash HICP for June and the May M3 figures on Thursday, both of which are expected to support the view of higher interest rates. Elsewhere, headline euro-zone inflation is expected to remain relatively high in June with the initial estimate coming in at 2.3%, which is still well above the ECB's preferred measure and provides further evidence that the central bank will need to continue raising their benchmark interest rate from the current 2.50%.

Data Released 26th June

EU 09:00 Current Account (April)

U.S 15:00 New Home Sales (May)

written by Adam Solomon

The British Pound came under intense pressure yesterday amid the untimely death of David Walton, who was a member of the Bank of England's monetary policy committee and the sole voice for a rise in UK interest rates over the past two months. As a result of the news, the Pound dropped significantly against the majors, managing to record a new low against the Dollar by dropping under 1.8300 for the first time in nearly two months. The negative sentiment surrounding the Pound continued throughout the course of the day, particularly against the Dollar, which managed to shrug off poor jobless claims data and has been boosted further on speculation it's yield advantage will keep luring investors to U.S denominated assets. There was also some significant data released in the UK yesterday as the CBI Industrial Trends survey came out virtually in line with expectations as the recent pick-up in manufacturing continues to bolster UK GDP in the second quarter.

There has been a sparse supply of significant data released in the euro-zone this week and the euro continued to remain firm against Sterling yesterday despite some poor Italian consumer confidence data, which provided further evidence that near record oil prices are having a damaging effect on consumer sentiment. In addition, euro-zone industrial orders came out as expected, showing a 2.0% gain in new orders for the month of April and as a result, the Euro strengthened significantly against Sterling to close under 1.4550 last night.

The U.S Dollar staged a significant rally against the majors yesterday, firming by 0.6% against the Euro and 0.8% against Sterling despite the apparent cooling of the labour market with the weekly jobless claims rising to 308,000 in the week ending the 17th June. In addition, an index of U.S leading economic indicators declined in May by the most in nine months, dropping 0.6%, which indicates that higher interest rates may curb economic expansion. Nevertheless, the positive momentum surrounding the dollar can be attributed to a variety of factors including the prospect of further monetary tightening at the end of this month with many investors altering their forecast that U.S interest rates will reach 6% by the end of 2006. The Federal Reserve would ideally like to pause at 5% and it has even been argued that the Fed need a weaker dollar to make U.S exports more attractive and thusly narrow the ever widening trade deficit. However, the economic data released has pointed to rising core inflation and continued growth in the second quarter and therefore the Fed will need to continue raising interest rates in order to keep inflation under control. There is some significant data released in the States this afternoon with U.S Durable goods orders expected to increase by 1.0% in May.

Data Released 23rd May

U.S 13:30 Durable Goods Order (May)

written by Adam solomon

We witnessed a significant day of market movement yesterday as Sterling came under pressure, particularly against the Euro, following the release of the minutes of the Bank of England's last MPC meeting and as widely expected, policy makers voted 7-1 in favour of keeping UK interest rates at 4.50%. Once again, David Walton was the only member of the eight strong committee who voted for a rise in rates and Sterling reacted poorly against the majors as new member David Blanchflower, who was expected to join the chorus for higher interest rates, voted for a no change in UK monetary policy. There is some significant data released in the UK today with the CBI Industrial Trends survey and it is widely anticipated that the recent pickup in manufacturing will show sustained confidence in the figures released this morning, although the increased cost of raw materials and higher input prices could have a negative impact on orders.

The Euro strengthened significantly against the majors yesterday, rising 0.5% against the Pound to push the rate back under 1.4600 following comments from the ECB chairman, Jean-Claude Trichet, who reiterated that euro-zone economic growth was becoming more sustained into the second half of the year. The single currency may make further gains this morning as euro-zone industrial orders are expected to show positive signs of growth in April with forecasters are anticipating a rise of 1.8% from March. In addition, Italian Consumer Confidence is released this morning and is expected to remain unchanged in June.

The Dollar has been hampered in recent sessions as the threat of higher interest rates begins to wane on consumer sentiment and the currency sustained further losses against the Euro yesterday, dropping 0.6% to close around 1.2650. There is some significant data released in the States this afternoon with the weekly jobless report widely expected to rise to 305,000 from 295,000 last week and provides further evidence that the expansion of the U.S labour market is cooling in the second quarter, another factor that will have a damaging affect on consumer spending and retail sales. In addition, the Dollar may come under further pressure with an index of leading U.S indicators widely anticipated to show a drop of 0.5% in May, providing yet another indication of slowing economic growth.

Data Released 22nd June

UK 10:00 CBI Industrial Trends (June)

EU 09:00 Industrial Orders (April)

U.S 13:30 Initial Jobless Claims (w/e 17th June)
U.S 13:00 Leading Indicators (May)

written by Adam Solomon

We witnessed another quiet day in terms of market movement yesterday and Sterling continued to remain firm against the Euro despite a less than convincing report from the Chancellor, Gordon Brown, where he announced a record budget deficit for the public sector in the month of May. The UK deficit has expanded to £8.7 billion in the figures released for May, which is a £1 billion year-on-year increase. Public sector net borrowing including capital investment showed a deficit of £10 billion, the second highest on record. We may see some market movement this morning with the release of the minutes of the June MPC meeting and it is widely expected that the eight strong committee voted 7-1 in favour of keeping UK interest rates at 4.50%.

There has been a real short supply of significant data released in the euro-zone in the beginning part of this week and tomorrow is no exception but the chairman of the ECB will address the EU parliament's economic and monetary affairs committee at midday and we will be watching closely for any news on the further tightening of euro-zone interest rates following the ECB's decision to adopt a more measured and cautious approach earlier this month.

The U.S Dollar was given an unexpected boost yesterday as a sharp rebound in Home construction helped ease concerns that higher interest rates are beginning to wane on consumer sentiment. Housing Starts rose a greater than expected 5% to an annual rate of 1.957 million in May despite forecasters predicting a drop towards 1.84 million. As a result, the Dollar rallied against Sterling, briefly dropping under 1.8400 but any sustained Dollar gains were muted as concerns continue to surface that higher U.S interest rates will inevitably curb economic growth.

Data Released 21st June

UK 09:30 Minutes of June MPC meeting
UK Chancellor, Gordon Brown, gives Mansion House Speech

Just to re-cap from last week, the Dollar received an unexpected boost on Friday as the U.S Current Account deficit narrowed by much more than forecast in the first quarter, dropping from a record high in the previous three months, led by a modest improvement in the Trade Deficit. There is a sparse supply of data released this week, both in Europe and the States, and yesterday the Dollar made further gains against the majors, firming 0.6% against the Euro and the Pound as the market has now fully priced in a rise in U.S interest rates at the end of this month and forecasters have already begun speculating that an August rate rise is on the cards. However, the aggressive and consistent monetary tightening in the States is beginning to wane on consumer sentiment and further evidence of this is expected in the Housing data released this afternoon where activity and prices have been cooling since the 33-high in January, dropping by 19.4% in just over five months. Therefore, as a direct result of higher interest rates, U.S housing starts is widely expected to decline in May to 1.84 million.

A survey conducted by the Bank of England has showed that UK Inflation expectations for the next 12 months have dropped from February with prices expected to rise 2.5%. The governor of the BoE, Mervyn King, reiterated earlier this month that wage pressures were muted and that inflation expectations were not yet a "serious concern" for the Bank, although it would be monitored closely. The highlight of this week will undoubtedly be the minutes of the June MPC meeting on Thursday where the BoE kept UK interest rates at 4.50% for the tenth month in succession but it will be interesting to see if anymore members have joined David Walton in recommending that the bank raise interest rates to calm the threat of rising inflation. There is some significant data released in the UK this week with the CBI industrial trends survey widely expected to show continued improvement in the Manufacturing sector, although the increase in global energy costs and raw materials may have a negative impact.

There is a short supply of significant economic data released in the Euro-zone this week and the market has been relatively unchanged, hovering around 1.4650 against the Pound despite German Producer Prices accelerating at the fastest pace in 24-years led by a sharp increase in global energy costs. Goods are 6.4% more expensive than at this point last year, which is the biggest year-on-year growth since June 1982. The ECB chairman, Jean-Claude Trichet, will testify to the EU parliament on Wednesday and his comments will be watched closely as the market looks for new direction with regard monetary tightening.

Data Released 20th June

UK 09:30 M4 Lending (May)

U.S 13:30 Housing Starts (May)

written by Adam Solomon

Yesterday, the Pound made further gains against the Dollar and the Euro following the release of the monthly house price survey from the Royal Institution of Chartered Surveyors, which showed that prices had increased dramatically in May and the increase to 20 represented the single biggest rise in over 2 years. House prices account for 60% of UK wealth and have risen consistently almost every month since the Bank of England reduced interest rates to 4.50%, which perhaps gives a little insight as to why the BoE are hesitant in adjusting monetary policy to counter the threat of higher inflation. In addition, UK Retail Sales rose for a fourth month in May led by a sharp increase in the sales of electrical goods, such as high-definition televisions, in preparation for the World Cup. Sales increased by 0.5% from a revised 0.7% in April, which was largely in line with expectations.

There was some significant inflationary data released in the Euro-zone yesterday as the Consumer Price Index for the month of May came out as expected, showing a 0.3% month-on-month increase compared with 0.7% in April. Inflation in the Euro region is up at 2.5%, which is above the ECB's predicted rate of 2.3% this year indicating that the central bank will need to lift interest rates once more following a quarter-point increase earlier this month. However, the Core CPI measured below expectations at 1.3% providing further evidence that higher energy and food prices are having an impact on the inflation gauge. There is some important data released this morning with Industrial Production widely expected to hold at 0.4% growth in April providing an indication that euro-zone exports will help quash the threat of higher oil prices and rising interest rates. The ECB elected to adopt a more measured approach with regard the tightening of monetary policy because the Euro has risen by 8% versus the dollar in the past six months alone and if the single currency appreciates much more, it will have a damaging effect on their exports.

As we predicted in Tuesday's afternoon update, the recent resurgence of the U.S Dollar has seemingly come to a grinding halt as rising interest expectations failed to support the currency following a seven day winning streak over the past couple of weeks. We witnessed a significant day of market movement as the Dollar lost ground for a second day in succession with U.S net capital inflows plummeting in the figures for April, dropping to $46.7 billion, which is the lowest in over a year, and that is despite forecasters predictions that inflows remained relatively unchanged at $70.4 billion. However, even more significantly, U.S net capital inflows in April will be unable to cover the ever-widening U.S Trade Deficit, which came in at $63.4 billion.

There is some hugely significant data released this afternoon in the States with the U.S current account deficit expected to moderate to $220 billion in the first quarter of 2006 and the data will provide the final indication of U.S trade conditions following the disappointing trade deficit and investment flow balances. In addition, there is some equally important data released later this afternoon, which could potentially rock the dollar with U.S consumer confidence widely anticipated to drop for a third month in June with the University of Michigan's preliminary index for consumer sentiment falling to 79, the lowest reading in eight months.

Data Released 16th June

EU 10:00 Industrial Production (April)

U.S 13:00 Current Account Deficit (Q1)
U.S 14:45 Michigan Sentiment (June Prelim)

written by Adam Solomon

Yesterday represented a significant day of market movement and the Pound remained solid against the Euro and the Dollar despite weak UK unemployment data for May where the number of people claiming for jobless benefits rose to the highest level in over 4 years as the economic slowdown in the second half of last year and higher global energy costs begins to have a damaging impact on the economy. UK jobless claims increased by 5,800 from April to 950,900, which was above market expectations and the highest level since April 2002. However, the number of employed people in the UK actually climbed by 130,000 in the last month to 28.94 million, which is the highest since records began in 1971 and growth in UK average earnings increased to 4.6% in the 3 months to April, which was largely in line with expectations. There is some significant data released in the UK this morning with Retail Sales widely expected to show signs of growth in the figures released for May as World Cup spending reached it's peak and the consensus forecast is for the annual rate to increase to 3.6% in May but higher petrol prices and rising utility bills will continue to hamper consumer spending.

In the past 48hrs, there has been a sparse supply of economic data released in the Euro-zone and therefore the rate against Sterling has remained fairly stagnant holding around 1.4630. There is some significant data released in the Euro-zone this morning, which could potentially give the Euro a much needed boost with the Core measure for inflation widely anticipated to increase for a third consecutive month in May with the headline rate expected to rise to 2.5% primarily due to higher oil prices. After the ECB chose to raise interest rates by a quarter-point last week, there will be renewed calls for the central bank to bring inflation under control and therefore signal a further rate increase in the coming months.

The U.S Dollar has enjoyed a decent rally in recent weeks and off the back of a seven day winning streak against the Euro and the Pound, the rate plunged by half a point yesterday, dropping 0.7% against Sterling and falling 0.6% against the Euro after achieving a six-week high overnight. The Dollar has been gaining in the past couple of weeks as rising inflation has prompted investors to shift their expectations of a June rate hike and yesterday provided yet more evidence that the Federal Reserve will need to bring U.S inflation under control as consumer prices rose by 0.3% in May, which was slightly above market expectations. However, the Dollar dropped in the aftermath of the Consumer Price Index and it is thought that although U.S rate rises have boosted the dollar in recent months, there is a concern that higher interest rates will begin to curb economic growth. There is an abundance of data released in the States this afternoon, most notably Industrial Production, which is widely anticipated to show modest signs of growth in May and net capital inflows are expected to increase to $72.5 billion in April.

Data Released 15th June

UK 09:30 Retail Sales (May)

EU 10:00 Harmonised CPI (May)

U.S 13:30 Empire State Index (June)
U.S 13:30 Initial Jobless Claims (w/e 10th June)
U.S 14:00 TICS Net Capital Inflows (May)
U.S 14:15 Industrial Production (May)
U.S 17:00 Philly Fed Index (June)

written by Adam Solomon

There was some significant data released in the UK yesterday with inflation reaching a seven-month high in May as Consumer Prices gained 2.2% year-on-year, climbing 0.5% from April. The Pound received a relative boost on the release on the news as speculation intensified that the Bank of England would need to join the global round of interest rate rises for the first time in over ten months. Global inflation, principally due to a sharp rise in energy costs, has already forced the hand at the ECB and the Federal Reserve into lifting their benchmark rates but it seems the BoE have been waiting for a obvious recovery in consumer spending before a tightening of monetary policy can resume. The Pound may come under some pressure today with UK unemployment set to increase last month and Jobless Claims is forecasted to reach the highest level in four years as companies shed workers in order to stem to the impact of surging energy costs and slower economic growth. In addition, UK Average Earnings are expected to show modest signs of growth in the 3 months to April, rising to 4.6%.

The Euro remained relatively unchanged yesterday despite poor economic data coming out of Germany with the ZEW survey for investor sentiment slipping dramatically in June to 37.8 from 45.0 in May primarily due to higher energy costs, rising Euro-zone interest rates and the rapidly declining equity markets in the region. Elsewhere, the German consumer price index showed that prices had slightly declined in May, dropping to 1.9%, which was largely in line with expectations.

Among the emerging market currencies there was a sustained period of volatility yesterday and once again the U.S Dollar proved to be the relative safe haven for investors, recording it's seventh day winning streak against the Euro and closing just under 1.8400 against Sterling. The Dollar also rallied on news that U.S Producer Prices increased by more than expected in May, compounding fears over higher inflation, which has prompted no fewer than six Federal Reserve officials to publicly announce their concern in the past week. That has led to renewed calls for the Fed to lift U.S interest rates for a 17th consecutive month at the end of June and we can expect further market movement today with U.S Consumer Prices widely expected to increase by 0.4% in May, largely due to a significant rise in petrol costs and a slow-down in consumer spending.

Data Released 14th June

UK 09:30 Unemployment (May)
UK 09:30 Average Earnings (3 months to April)

U.S 13:30 Consumer Price Index (May)
- Ex Food & Energy
U.S 13:30 Real Earnings (May)

U.S 19:00 Fed Beige Book

written by Adam Solomon

The Pound made some significant gains against the Euro yesterday, rising 0.5% to close at 1.4650 last night due to a string of economic factors. Firstly, UK Factory gate inflation increased to 0.3% in May, pushing the annual rate upto 3% thanks largely to the rising price of raw materials and higher energy costs. Sterling also rose by 0.2% versus the Dollar on the release of the May Producer Price Index, which showed that petrol costs have helped push price inflation of goods leaving UK factories to it's highest level in eight months. In addition, the DCLG housing market survey showed that UK House Prices rose considerably in April taking the annual rate upto 5.1% with a 3.3% month-on-month increase from March despite the more recent surveys from the Halifax and Nationwide, which have suggested that prices had declined. There is some hugely significant inflationary data released in the UK this morning with the Consumer Price Index set to show that inflation in the UK has risen to a six month high in May, which fuels speculation that the Bank of England will need to lift interest rates. Consumer Prices may have risen by 2.1% from this time last year but the BoE may continue to adopt a more cautious approach and draw comfort from core inflation's moderation to 1.2%.

The Euro has been steadily slipping against the majors since the ECB announcement last Thursday and has dropped 0.3% against the Dollar over the last 24hrs following the weekend's meeting of G8 Finance Ministers, which passed without any call for a weaker dollar and a Euro sell-off was also prompted by comments from the French finance minister, Thierry Breton, who reiterated his concerns over a strong Euro, saying the recent stabilisation was "welcome". We can expect the Euro to come under further pressure this morning with German investor confidence expected to decline for a fifth month in June amid concerns over higher euro-zone interest rates and rising inflation. The ZEW centre for European Economic Research will release it's latest index for confidence in Europe's largest economy and we expect economic sentiment to fall towards 47.0 from 50.0 in May. In addition, the German Consumer Price Index is released this morning and forecasters are anticipating that inflation declined to 1.9% in May but a 30% surge in the price of oil over the past year is putting increased pressure on the euro-zone economies.

The U.S Dollar continued it's longest winning run since November yesterday amid further calls for the Federal Reserve to bring inflation under control and therefore raise U.S borrowing costs for a 17th month in succession. Another Fed policy maker reiterated comments from the chairman Ben Bernanke last week that higher inflation is unwelcome and the Fed would make sure it was "not sustained". Therefore, the market reacted to the news as the chances of a U.S rate increase later this month rose to 86% and Dollar sentiment is looking increasingly positive while we remain under 1.8500 against Sterling. There is some important data released this afternoon in the States with U.S Retail Sales widely expected to show the smallest increase in three months in May, providing further evidence of a slow down in the economy and the damaging effect that higher interests are having on consumer spending.

Data Released 13th June

UK 09:30 Consumer Price Index (May)

GER 10:00 ZEW Economic Sentiment Index (June)

U.S 13:30 Producer Price Index (May)
- Ex Food & Energy

U.S 13:30 Retail Sales (May)

U.S 13:30 Business Inventories (April)

written by Adam Solomon

Following on from last week, the Dollar was given an unexpected boost on Friday as the U.S Trade Balance showed that the deficit in goods and services widened to £63.4 Billion in April primarily due to an increase in the cost of imported oil and a sharp rise in purchases of industrial machinery. However, the market was expecting the trade gap to widen more excessively to $65 Billion and as a result the Dollar rallied to trade back under 1.8400 against Sterling. Nevertheless, we bounced off the low from the previous day at 1.8360 and as we predicted in the afternoon update the market traded back towards 1.8450 at the close. In recent weeks, there has been a lot of volatility in the market as inflationary data both in Europe and the States draws more attention and we have a plethora of significant data released this week with the U.S consumer price index on Wednesday and forecasters are anticipating that inflation accelerated by as much as 0.3% in May. In addition, we should get a further indication of the Fed's intention to raise U.S interest rates this month with retail sales and PPI both released on Tuesday.

Following the Bank of England's announcement last week that UK interest rates will remain at 4.50% for a tenth month in succession, there is some key inflationary data released this morning with the Producer Price Index set to increase in May with output prices rising to 2.5% from 2.3% in April primarily driven by higher energy costs. The Pound may strengthen on the release of UK retail sales on Thursday, which is widely expected to show positive signs of growth following World Cup fever gripping the nation. Annual growth is predicted to rise significantly to 3.6% in May but higher petrol prices and rising unemployment are having a negative impact on consumer spending. In addition, there is some important data released tomorrow with the UK consumer price index expected to show that inflation has risen to 2.2% in the last month, which is slightly ahead of the government's target, although the Core measure has dropped to 1.2%.

The Euro was struggling towards the latter part of the week following the ECB's decision to lift interest rates by a quarter-point last Thursday and in the accompanying press conference, Jean-Claude Trichet reiterated that euro-zone interest rates are at an appropriate level at 2.75% and therefore provided an insight into the ECB's intention to adopt of more measured approach to monetary tightening. There is also some inflationary data released in the euro-zone on Thursday with the Core measure for inflation likely to mirror the initial estimate last month following an increase to 1.6% in April.

Data Released 12th June

UK 09:30 Producer Price Index Output (May)
- Input

U.S 21:00 Treasury Budget (May)

written by Adam Solomon

Yesterday represented a significant day of events in Europe and the market has reacted to the news in a manner, which we anticipated in yesterday's morning update. The European Central Bank met in Madrid at midday and elected to lift interest rates by 25 basis points to take their benchmark rate to 2.75%. However, in the past couple of weeks the market has been pricing in a 20% chance that policy makers would lift rates by as much as 50 basis points, which would be the single biggest move in over six years. Therefore, the Euro fell sharply in the aftermath of the announcement and the bearish mood continued in the ensuing press conference where ECB chairman, Jean-Claude Trichet, indicated that euro-zone interest rates are still "low" but the choice of language used when describing the threat of inflation was less aggressive in his statement, leading to speculation that the ECB won't raise rates further in July. As a result, the Euro dropped 0.4% against Sterling to close above 1.4550 last night and there is some significant data released this morning in the euro-zone with German industrial production set to remain unchanged at a 2.4% growth rate in April.

The Bank of England announced yesterday that UK interest rates would remain unchanged at 4.50% for the tenth month running as policy makers continue to adopt a cautious approach in the tightening of monetary policy despite a recent pickup in manufacturing and service sector. Economic growth looked to be accelerating in the second quarter but it seems that the MPC are at this point unconcerned over the threat of rising inflation. The minutes of yesterday's policy meeting will be released on the 21st June where we will get an indication of how the eight-strong committee voted with David Walton the only member to recommend a rise in UK interest rates last month. The focal point today in terms of data released will be the Global Trade Balance with forecasters anticipating that the deficit has widened to £5.9 billion. There was some data released in the UK yesterday with the CIPS index for factory output expanding for a tenth month in April, rising 0.2% after a 0.7% jump in March, which was the biggest gain in seven months.

The recent resurgence of the U.S dollar continued for a fourth day running yesterday, firming 0.6% against Sterling to record new lows under 1.8400 after speculation intensified that the Federal Reserve will need to lift borrowing costs for a 17th consecutive month in June after the chairman, Ben Bernanke, said inflation was "unwelcome" and the Fed would make sure that is was "not sustained". In addition, the Dollar was given another timely boost yesterday after U.S wholesale inventories rose by more than forecast in April, jumping 0.9% despite expectations of a modest gain of 0.5%. This emphasises the comments from Alan Greenspan earlier this week where he stated that U.S productivity would outweigh the threat of rising global energy costs. There is some significant data released this afternoon in the States with the monthly Trade Balance expected to show that the deficit has widened to $65 billion in April after a significant rise in U.S import prices.

Data released 9th June

UK 09:30 Global Trade Balance (April)

GER 11:00 Industrial Production (April)

U.S 13:30 Trade Balance (April)

U.S 13:30 Export Prices (May)
- Import Prices

written by Adam Solomon

The U.S Dollar continued it's three day winning streak yesterday as former Federal Reserve chairman Alan Greenspan made his first public statement since leaving the position earlier this year and testified to the Senate over concerns for oil dependence and economic risk. Following comments from Ben Bernanke and other Fed policy makers seemingly paving the way for another interest rate hike later this month, Greenspan talked about U.S productivity outweighing a rise in global energy costs and higher petrol prices having a damaging effect on the housing market. As a result, investors priced in an 82% chance that the Fed would lift borrowing costs for a 17th consecutive month, taking them upto 5.25%. The Dollar made significant gains against Sterling at the close and overnight we traded through the major support level at 1.8500. There is the some data released in the States this afternoon with the weekly jobless report at 13:30 and wholesale inventories for the month of April is expected to increase by 0.5%. The monthly U.S trade deficit, released tomorrow afternoon, will give us an indication that the Dollar's recent resurgence will continue but at present it is a very good time to be selling Dollars back to Sterling considering we are under 1.8500 for the first time in nearly a month.

Without doubt the most significant event of the day will be the ECB interest rate announcement at 12:45 today and the accompanying press conference shortly after where the chairman, Jean-Claude Trichet, may give us an indication of future monetary policy and the reasons behind the central bank's decision to lift interest rates. It is very much factored into the market that the ECB will lift rates by 25 basis points this month but in recent weeks investors have been deliberating over whether policy makers will increase borrowing costs by as much as half a point in the wake of higher euro-zone inflation and the continued improvement in the service sector and manufacturing industry. However, such an aggressive move was undermined yesterday as the French finance minister, Thierry Breton, expressed his concerns that the single currency would appreciate too quickly and maintained that the Euro was "fully valued" at current levels. The Euro has broken 1.4500 against Sterling in the build-up to the announcement and we can expect the market to remain relatively unchanged if the ECB lift rates by 0.25% and may even show some weakness to the news.

The Bank of England will convene at midday today to announce their latest stance on interest rates and following a glut of reasonably poor UK data in the past two weeks, forecasters are expecting a no change from the current 4.50% which will be the tenth month in succession that policy makers have kept rates the same. However, the recent pick-up in manufacturing output and signs of improving consumer sentiment has increased speculation that the BoE will need to lift interest rates towards the latter part of the year in order to keep inflation around the government's 2% target. There is some significant data released in the UK this morning with industrial production in April expected to show modest signs of growth with forecasters predicting an increase of 0.3% as global demand strengthens.

Data released 8th June

UK 09:30 Manufacturing Output (April)
- Industrial Production

UK 12:00 BoE Interest Rate Announcement

EU 12:45 ECB Interest Rates Announcement and Press Conference at 13:30

U.S 13:30 Initial Jobless Claims (w/e 3rd June)
U.S 15:00 Wholesale Inventories (April)

written by Adam Solomon

We witnessed a fairly quiet day in terms of data released yesterday and the market remained relatively stagnant but there was some positive news for the Pound as the BRC Retail Sales survey showed year-on-year growth of 3.6% and first quarter sales were up 2.7% against the same period last year, which was slightly ahead of market expectations. The Bank of England have been waiting for a pick-up in consumer sentiment before shifting monetary policy but the figures released yesterday were encouraged by the recent rise in sales of large high-definition televisions in preparation for the World Cup and therefore UK consumer confidence remains fragile. Further emphasis of this sentiment is expressed in the Nationwide survey on UK confidence this morning with the index sticking close to the six-month low in April, rising to 94 in the figures released for May as consumers struggle with rising debts and higher utility bills.

Without any significant data released in Europe or the States yesterday, we can look forward to euro-zone retail sales this morning and forecasters are anticipating a dramatic revival in European consumer sentiment with sales expected to rise from 0.2% in March to 2.4% in April led by the continuing improvement in the labour market. The Euro has been gaining this week on speculation that the ECB will need to lift interest rates by as much as half a point on Thursday but if policy makers choose to elect a more measured approach then the Euro may decline against Sterling and the U.S Dollar. However, there are concerns from a selection of European finance ministers who are conscious of the fact that the dramatic appreciation of the Euro could have a negative impact on the economy. The single currency has gained by more than 8% versus the Dollar this year alone and nearly 4% since mid April, which has left policy makers anxious that European exports will become less attractive to foreign investors and therefore widen the trade deficit.

The Dollar has continued its recent rally in the past 24hrs, dropping under 1.8600 last night against Sterling and recording a three day winning streak against the Euro as speculation intensified that the Federal Reserve will lift borrowing costs for a 17th month in succession in June. Following Ben Bernanke's testimony in Washington on Monday, investors hurried back to buy the Dollar as he talked aggressively about the Fed's aim to contain rising inflation. Fed Bank of Atlanta president Jack Guynn will speak on the U.S economic outlook and housing markets today and former Fed chairman Alan Greenspan will testify to the Senate on oil dependence and economic risk. Elsewhere in the States, there is some significant data released with Consumer Credit expected to rise to $3.5 Billion in April, which is up from $2.5 Billion in March.

Data Released 7th June

EU 10:00 Retail Sales (April)

U.S 14:00 Greenspan to Testify to Senate on Oil Dependence and Economic Risk
U.S 20:00 Consumer Credit (April)

written by Adam Solomon

The Pound came under renewed pressure yesterday and traded down against the Dollar and the Euro despite some positive UK data with the CIPS Services survey coming in slightly better than expected at 59.2 in May and the robust growth in the service sector is causing investors to speculate that the Bank of England will need to lift borrowing costs over the coming months. However, the BoE are widely expected to hold interest rates at 4.50% in June when they meet on Thursday this week as the MPC awaits a pick-up in consumer sentiment and further evidence of higher inflation. There is some significant data released this morning with the British Retail Consortium's sales survey for the month of May expected to show a modest improvement from April, despite an increase in household utility bills and higher unemployment.

The Euro has been steadily gaining against Sterling over the past couple of weeks, due in part to a string of poor UK data and it has to be said a plethora of positive euro-zone data, which has led to increased speculation that the ECB could raise their benchmark interest rates by half a point, which would be the biggest single increase in over 6-years. However, the market is now anticipating a bigger move in interest rates and if the ECB decide to take a more measured course of action when they convene on Thursday and only raise rates by 0.25% then the Euro may have a negative reaction in the market. There was some more positive economic data released yesterday in the euro-zone with the European service industries showing the strongest growth in five years, which has led to increased speculation that the ECB will outpace the Federal Reserve with regards raising interest rates and the Euro has already gained by 8.8% versus the Dollar this year alone.

The Dollar has declined dramatically since the monthly U.S job report last Friday, which showed that the economy added much fewer jobs than anticipated last month and as a result investors priced down the chances of June rate increase when the Federal Reserve announce their latest stance on interest rates later this month. There was some significant data released in the States yesterday with the ISM's index for non-manufacturing businesses dropping to 60.1 in May from 63.0 in April as consumer demand weakened and costs increased. Last night in Washington, Ben Bernanke, the chairman of the Federal Reserve, addressed an audience of banking executives and chose to use some aggressive language when talking about U.S inflation, saying it was "un-welcome" and the Fed would make sure it was "not sustained". This indicates that the Fed may not be ready to pause at 5% interest rates just yet.

Data Released 6th June

UK 00:01 BRC Retail Sales Survey (May)

written by Adam Solomon

Following the release of the latest FOMC minutes last week, the dollar advanced against the majors with speculation building that the Fed will need to lift borrowing costs for a 17th straight month in June in order to keep inflation in check. However, on Friday the Dollar dropped to a three week low against the Euro and made significant losses against Sterling as the monthly U.S job report showed that the economy added much fewer jobs than expected in May and as a result the market is now pricing in only a 50:50 chance of a rate hike this month. The focal point of this week in terms of U.S data released will be the Trade Balance on Friday and it is widely anticipated that the deficit widened to $65 Billion in May, primarily due to higher import prices and rising energy costs. With a number of inflationary pressures weighing on Dollar sentiment, we can expect further market volatility today with the ISM non manufacturing index released this afternoon and it should provide some direction on growth in the service sector with forecasters predicting a decline to 60.1 in May from 63.0 the previous month.

In the past couple of weeks, the Pound has been hampered by a series of poor economic data that has calmed speculation that the Bank of England will need to lift interest rates in the coming months and therefore, the BoE are widely expected to hold rates at 4.50% in the announcement this Thursday. There is some significant data released in the UK over the course of this week with Industrial Production and the BRC Retail Sales survey tomorrow but today the focus will be on the CIPS services survey, which is expected remain strong at 59.0 in May.

Without doubt the most significant event this week will be the ECB interest rate announcement on Thursday with the market pricing in a probable quarter-point increase to take their benchmark rate to 2.75% following a dramatic increase in euro-zone industrial output and rising inflationary pressures. However, the choice of language used by some policy makers in the build-up to the announcement has left some investors speculating about a more aggressive move, seeing a rise of 0.50%, which would be the first time in over six years. We will be watching the accompanying press conference where Trichet may indicate that a future change in monetary policy is scheduled over the coming months and on this news we can expect the Euro to strengthen significantly against Sterling and the beleaguered U.S Dollar with 1.3000 a real possibility. There is some significant euro-zone data released this morning with services PMI's expected to remain at an elevated level and retail sales, which has been disappointing in recent months, is released tomorrow and is widely anticipated to show robust signs of growth in April.

Data Released 5th June

EU 09:00 PMI Services (May)

UK 09:30 CIPS Services Survey (May)

U.S 15:00 ISM (Non-Mfg) Index (May)

written by Adam Solomon

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

We witnessed a significant day in terms of economic data released yesterday and Sterling came under pressure against the majors, dropping 0.3% against the Euro following a disappointing UK housing market report and a drop in UK mortgage approvals. The Nationwide Index showed that prices barely grew last month, rising just 0.2% following a modest gain of 0.1% in April, which means that the annual growth rate is 4.7% at the end of May against 5.3% in the first three months of the year. Coupled with poor hosing data, UK mortgage approvals fell to a seven month low for the month of April as concerns for rising unemployment and higher borrowing costs discouraged first-time buyers. However, there was some positive news for Sterling as UK Retail Sales accelerated faster than expected in May, according to the CBI's Distributive Trades Survey, which also showed the highest unemployment in it's 23-year history for the second quarter in row.

There was some positive data released in the Euro-zone yesterday as the EU index of economic sentiment in consumers and companies showed that confidence in the European economy rose to the highest level in over 5-years led by a sharp increase in German retail sales and lower unemployment, which provided yet more justification for higher interest rates. The ECB convene next week on June 8th and it is widely anticipated that they will raise borrowing costs as the economy accelerates into the second quarter and inflation continues to rise. Consumer prices increased this month by the most since October last year, prompting speculation that the central bank will lift interest rates by as much as half a point this month, the first time since June 2000. There is some significant data released this morning with PMI Manufacturing expected to show a partial decline in May following near-record oil prices and the sharp increase in the value of the Euro. Elsewhere, unemployment data for the month of April is expected to remain unchanged at 8.1% in the figures released this morning.

The most significant market news came last night when the Federal Reserve released the minutes of it's May policy meeting and investors are now pricing in a probable rise in U.S interest rates later this month as the Fed attempts to stem the threat of rising inflation by taking their benchmark rate to 5.25%. It was widely anticipated that the Fed would pause at 5% interest rates this month but Ben Bernanke did indicate that a further rise in rates would be likely providing the economic indicators suggest that the economy was accelerating faster than predicted. As a result, the Dollar has rallied against Sterling and it was boosted further when the Chicago's purchasing managers' index posted an unexpected increase to 61.5 in May due primarily to a pick up in new orders and a rise in employment despite forecasters predicting a drop towards 57.2 from April.

Data Released 1st June

UK 09:30 CIPS Manufacturing Survey (May)

EU 10:00 Unemployment Rate (April)
EU 10:00 Revised GDP (Q1)

U.S 13:30 Initial Jobless Claims (w/e 27th May)
U.S 13:30 Productivity/Unit Labour Costs
U.S 15:00 ISM Manufacturing (May)
U.S 15:00 Construction Spending (April)
U.S 15:00 Pending Home Sales (April)
U.S 21:00 Domestic Auto Sales (May)

written by Adam Solomon