Sterling gains further ground after falling jobless claims figures, euro continues rally

Tom Tong13/Jun/2013Currency Updates

EUR

The euro gained some ground yesterday over USD and JPY. From the looks of it, we have the strong showing from the industrial production report to thank for the euro’s rally. According to the latest stats, output was up by 0.4% in April amid forecasts that predicted a 0.2% slide. This seems to have overshadowed the CPI reports from Germany and France, which weren’t really supportive of the euro. German CPI clocked in just as expected at 0.4%, while French CPI came in below the 0.3% forecast at 0.1%.

The ECB yesterday defended itself in a German court against suggestions that its bond buying ability should be restricted. More than 35,000 Germans have filed complaints that the ECB plan to buy up the debt of stricken eurozone member states under its Outright Monetary Transactions scheme violates their constitution. But Chancellor Angela Merkel has defended the ECB.

Today, we have the ECB monthly bulletin to look forward to, and if it’s anything like Draghi’s speech in the recent rate statement, it could show a bit of optimism for the region.

USD

The dollar fell broadly against other G10 currencies on Wednesday ahead of information to be released today. All will be focused on the Retail sales and Initial Jobless claims which have consensus to hit 0.4% and 345K respectively.

The retail sales figure will be especially important as it shows the true spending of the American general population and so is a quick marker to show the buying power of the US economy. The previous figure was 0.1% so the consensus of 0.4% will show a bullish future for the dollar.

In Equity news the Dow slid more than 100 points yesterday on another day of volatility as traders showed fear that the Fed will soon be winding down its Quantitative Easing.

In the US there are also a number of other data releases to watch (although relatively of lesser importance than Retail Sales). These are: Business Inventories, Import Price Index, Export Price Index and Continuing Jobless Claims.

GBP

As the market digests the reality of the UK economy in relation to low wages being the substitute for a lower jobless claimant count in the UK economy, perhaps the pound might be looking somewhat overvalued trading at these levels. Commerzbank are of this opinion on a technical basis.
The release of data by the Office for National Statistics (ONS) prompted sterling to drop by 0.1 per cent compared with yesterday (June 10th).

Economic fortunes can change awfully quickly. JPMorgan revised its UK second quarter GDP forecast to 2% q/q from 1% after industrial production data. They say the May service sector PMI added to the positive argument and that risks are to the upside.

Seeing as how production was essentially flat, the British economy has plenty of room to expand. With growth turning, GBP risks may also be on the upside additionally. Carney wants to put his stamp on growth by making a grand dovish gesture early in his term.

There is no relevant data emerging from the U.K of any significance today.

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Written by Tom Tong

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