Euro edges higher following impressive data in Germany
09/Jun/2015 • Currency Updates•
Sterling edged marginally higher against the US Dollar yesterday, up 0.25%, although traded lower against the single currency.
Monday saw little major market-moving data releases in the UK. The Confederation of British Industry did, however, cut its growth forecast and warn of further risks to the economy in the light of a possible “messy” outcome to the Greek crisis and uncertainty surrounding the potential EU referendum. Growth forecasts for this year were revised down from 2.7% to 2.4%, although the CBI expects the dip in first quarter growth, which fell to a three year low of 0.3%, to be a “temporary blip”. Despite the strong domestic picture, external risks are still tilted to the downside given a still sluggish Eurozone and uncertainty over Greece’s future.
Meanwhile, David Cameron was under the spotlight at the G7 summit in Germany. The Prime Minister claimed to have been misinterpreted over claims that cabinet members should resign should they back the UK leaving the EU.
The trade balance data for April, to be released this morning, will be mostly overshadowed by the Bank of England inflation report hearings at 10am. The central bank will be giving evidence to the Treasury Committee covering a range of topics that could influence Sterling volatility.
Some strong data and lost momentum in the Dollar caused the Euro to appreciate versus Greenback on Monday, ending the London trading session 0.9% higher.
There was a string of data releases in Germany yesterday morning that boosted the single currency. Industrial production in Europe’s largest economy surpassed forecasts, increasing by 0.9% in April, bolstering hopes of a strong second quarter in the Eurozone. Output in manufacturing, energy, and construction all increased on the previous month. Even more encouragingly, the trade surplus hit its highest level on record, propelled by strong exports which increased for the third consecutive month. A weaker Euro has made German goods more competitive outside the Eurozone, causing overall exports to increase by 1.9% month-on-month. A moderate decrease in imports, fuelled by weak domestic demand, allowed the balance of trade to swell to 22.3 billion Euros, the highest since records began in 1991.
This morning Eurostat will be releasing another revision of its quarter 1 growth figures for the Eurozone, in the only major announcement in Europe today. Growth is expected to remain unchanged at 0.4% QoQ.
The US Dollar dipped against its major peers on Monday following alleged comments from Barack Obama about the Greenback. The US Dollar index ended 0.6% lower, dropping off from the rally caused by last Friday’s impressive payrolls report.
The President was quoted as claiming a strong US currency was a problem for the economy, while speaking to a reporter at the G7 summit. However, this was later denied by officials. There was very little in terms of economic data in the US. The Federal Reserve’s labour market conditions index increased in May, up from -1.9 in April, to 1.3. This marked the highest reading since February this year.
Only second-tier data releases in the US this afternoon. Volatility in the Dollar may therefore be driven primarily by announcements elsewhere. Attention this week will instead shift in part to Thursday’s crucial announcement of retail sales data for May.
Rest of the world
The Turkish Lira tumbled an astonishing 5% after Sunday’s election denied the ruling AK Party a majority government for the first time in thirteen years. The formation of a new government now looks in doubt after the three major opposition parties all ruled out forming a coalition with the AK Party, raising the prospect of a repeat election. Elsewhere, the Kenyan Shilling weakened, with markets expecting the central bank to hike rates at its meeting today.