Euro data leads market swings

Claire Hogarth14/May/2014Currency Updates

GBP

The pound had a quiet day, with pivots more reactionary than UK driven. The pound was split, gaining against the euro but slipping back on the dollar.

The UK joined the equity party yesterday, with the FTSE powering up to 14 year highs. Investors are betting on a further rally across all industries for the rest of the week.

The most important event today is the Bank of England’s quarterly inflation report, along with comments from Mark Carney, which could give a clearer indication of forthcoming interest rate decisions. An inflation report of 1.6% last time is a possible reason why the bank has been reluctant to interest rate commitments.

Other data out today includes 3m unemployment, average earnings and claimant count.

EUR

The single currency slipped further down yesterday, hitting 5 week lows against the dollar and losing half a cent against the pound. Poor EU data was the catalyst for the original pivot but ongoing uncertainty over the European Central Bank’s forthcoming policy action weighed on the currency for the whole session.

The biggest swing came as a result of poor ZEW economic sentiment surveys, which came in 8 points under at 33.1 for Germany alone and 8.3 under at 55.2 for the EU as a whole. Wholesale prices in Germany and CPI in Portugal were marginally positive, although Italian CPI disappointed to the downside.

Today we have EU industrial production, after German and Spanish inflation was on par with expectations and French inflation disappointed. A bigger play will be EU inflation released tomorrow.

USD

The greenback made consistent if small gains across the board yesterday, despite relatively poor data. The dollar seems to have recovered some of the big losses sustained after Q1’s shocking GDP data, and will be looking to continue in that vein for the rest of the week.

Retail sales were the disappointing release yesterday, coming in at 0.1% MoM and a flat 0% disregarding auto sales. The rest of the US data was uneventful.

In equities market the S&P 500 topped 1,900 for the first time, building on the stock market gains from Monday. The recent bull run has some solid foundations, with positive corporate earnings and a swathe of M&A activity underpinning the gains. There has also been a noticeable ‘re-emergence’ of emerging market stocks, led by a resurgent India, after a stumble at the beginning of Fed tapering.

The positive sentiment has spilled over into money markets, with the dollar finally showing some consistent gains and the rupee at 10 months highs against the greenback.

Only mortgage applications and PPI due out tomorrow.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.