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
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