Dollar in modest rebound following strong employment figures
15/May/2015 • Currency Updates•
Thursday saw the UK currency hit a fresh six month high on the Dollar, buoyed by words overnight from Mark Carney who claimed in a radio interview that rates were likely to be higher this time next year. Carney also intervened in the EU referendum debate, claiming an EU poll should take place as soon as necessary to eliminate business uncertainty. Despite this new high, the Pound ended trading 0.1% lower against the Dollar.
House prices in Britain rose at their fastest pace in eight months in April, with the UK’s lack of affordable housing becoming a “national emergency” according to the Royal Institute of Chartered Surveyors. The report claimed that house prices were rising in all regions of the country for the first time since August, with supply falling at its fastest rate since May 2009 and the height of the financial crisis. The RICS monthly house price balance jumped to +33 last month, from +22 in March. The shortfall in homes for sale is likely to partly down to home owners wanting to wait until after the General Election before putting their property up for sale.
Today will be mostly quiet in the UK economy, although we’ll see the release of the Conference Board’s leading economic index at 2.30pm this afternoon, which could cause some Sterling volatility.
With many European countries observing Ascension Day on Thursday, yesterday was a muted one in the Euro-area in terms of economic releases. The Euro’s rally against the Dollar was therefore brought to a premature halt, with the single currency ending the London trading session 0.25% down and 0.2% lower versus the Pound. Despite this the currency still managed to touch a fresh three month high versus Greenback, still trading around a weekly high against Sterling.
The main event of the day came from President of the European Central Bank Mario Draghi who delivered a lecture at an event in Washington DC yesterday afternoon. The speech was mostly a non-event with little market reaction, although Draghi did reiterate that the ECB would continue its economic stimulus program as long as required. This would be until inflation picks up and com-panies and consumers gain confidence.
There are no major announcements in the Eurozone today. Attention will shift to next week, with inflation and trade data likely to be focal points.
The Dollar rebounded slightly after its recent series of declines, with the US Dollar index 0.3% higher on Thursday.
Claims for unemployment benefits continue to perform well in the US. Initial jobless claims decreased modestly last week to 264,000 with fewer workers being let go in the world’s largest economy. This suggests demand for staffing remains robust, and bodes well for future payroll numbers. The four-week moving average, which eliminates week-to-week volatility, fell to a fresh fifteen year low of just 271,750. Also encouraging, continuing claims for jobless benefits also came in better than expected, down to 2.229 million, although this runs on a one-week lag. In other releases, the producer price index fell by 0.4% for the month, down 1.3% YoY in April.
Mostly second tier releases across the pond to end the week including capacity utilisation and industrial production figures from the Federal Reserve.
Rest of the world
The Russian Ruble weakened sharply yesterday after the central bank announced it would be intervening in the foreign exchange market, buying $100-200 million daily to replenish its reserves. However, a host of emerging markets gained against the Dollar following Wednesday’s poor retail sales. The Real and Lira both boasted gains of one percent or more.
Elsewhere, the Ghanaian central bank governor Henry Wampah claimed Wednesday’s decision to hike the country’s benchmark interest rate by 100 basis points to 22% was to stabilise the Cedi and minimise the impact from an imminent rate hike in the US this year.