US Dollar plunges following disappointing labour data
24/Apr/2015 • Currency Updates•
Sterling rose on the Dollar yesterday following weak data across the pond to finish 0.45% higher.
Retail sales in the UK disappointed on the downside in March with sales falling by 0.5% month-on-month. While below the 0.4% increase that was forecast, it is worth bearing in mind much of the weakness was concentrated in sales by petrol retailers, which can be especially volatile. Excluding fuel, retail sales actually rose last month, 0.2% higher from a month previous. With consumer confidence elevated and, given the recent sharp increase in real wage growth, we expect the upward trend in sales volumes to remain buoyant in the next few months. Also from the Office for National Statistics, the level of public sector net borrowing increased from £4.8 trillion to £6.74 trillion in March.
Meanwhile, the Council of Mortgage Lenders revealed gross mortgage lending was down 12% in the first quarter after a sluggish start to the year. On the election front, the Institute of Fiscal Studies claimed four of the major parties had so far not provided “anything like full details” on plans to cut the country’s deficit.
A lack of data in the UK today means focus will likely shift to next week’s growth figures and the ongoing run-up to the General Election.
Despite a series of weak PMI data, the Euro soared on Greenback to end London trading 1.3% higher versus the US currency.
Growth figures for the Eurozone’s manufacturing and service sectors both missed expectations on Thursday morning. The manufacturing sector had a particularly lacklustre start to the year, with the flash PMI from Markit dipping from 52.2 to 51.9 in April. This followed disappointing releases from Germany and notably France, whose manufacturing sector contracted further from a reading of 48.8 in March to just 48.4 in April. These figures will be particularly disappointing, given the widespread expectations for a boost in growth, from the launch of the ECB’s quantitative easing programme last month. In Greece, Prime Minister Alexis Tsipras claimed they were close to a deal with creditors over a bailout, contradicting an earlier statement from the IMF.
Business sentiment towards the German economy is expected to tick upwards this month when IFO releases its highly anticipated confidence indices at 9am London time.
A surprisingly bad day of data releases in the US caused the Dollar to plunge on Thursday afternoon by 1% against its major peers.
Initial jobless claims disappointed for a second straight week in the US last week. Applications for unemployment benefits managed to hold below the threshold 300,000 for a seventh consecutive week, although rose by 1,000 to 295,000 for the week ending 18th April. The less volatile four-week moving average of claims also climbed to 284,500. The number of people continuing to receive jobless benefits, known as continuing jobless claims, also came in worse than expectations climbing from a revised 2.275 million to 2.325 million.
The Dollar was hurt further by a slowdown in manufacturing growth after Markit’s flash manufacturing PMI declined from 55.7 to 54.2. Key to the slowdown was a decline in export orders and a loss of competitiveness stemming from a strong Dollar. Despite this, impressive domestic demand looks set to help sustain a reasonably strong production trend according to Markit Chief Economist Chris Williamson. In a busy afternoon in the US, sales of new homes decreased by the most since July 2013 last month. New homes sales were down by 11.4% on a month previous to 481,000.
Focus in the US today will be squarely on the release of durable goods orders for March at 1.30pm GMT. Orders look set to increase in March following a February slump caused by harsh winter weather in most of the US.