Pound strengthens as UK trade deficit narrows in April
10/Jun/2015 • Currency Updates•
The Pound touched a one month low versus the Euro yesterday, although some encouraging trade figures from the ONS caused Sterling to end the London session 0.35% higher on the single currency and 0.25% up on the US Dollar.
Britain’s trade deficit narrowed to its lowest in over a year, down from around £3.1 billion in March to just over £1.2 billion in April. This was driven by exports, which soared by 4.8% in April alone, the largest increase since last September. The data offers hope of a turnaround, after the deficit cut 0.9% off quarterly economic growth in the first three months of the year. Exporters have struggled of late given weak demand from the Eurozone and a strong Pound in trade-weighted terms. The narrowing of the deficit will mean less weight on economic growth in the second quarter by comparison to the first, where expansion slowed to just 0.3% quarter on quarter.
Traders focus will now shift to monthly industrial and manufacturing output data set for release a 9.30am this morning. This will be followed by the NIESR GDP estimate for the three months to May in mid-afternoon.
The Euro fell gradually throughout trading yesterday, depreciating by 0.25% versus Greenback.
There was little in terms of economic data in the Eurozone yesterday. Eurostat did, however, announce updated growth figures for the first quarter, although these were, as expected, left unchanged. Growth was confirmed at 0.4% on the previous quarter and 1% higher on a year previous. The data reaffirms the opinion that the economy has benefitted from a weaker Euro amid stimulus measures launched by the ECB in the past year.
Over in Greece, the Greek government submitted a revised reform plan to the European Union and International Monetary Fund, a matter of days after Prime Minister Tsipras rejected a set of reforms put forward by creditors. Plans are believed to include a willingness to increase VAT, while conceding ground on pensions and country’s primary surplus target. Greece’s creditors will now study the list of counter proposals, with Tsipras warning that a failure to reach an agreement would be the beginning of the end for the Eurozone.
There are no major economic announcements in the Eurozone today, although industrial production figures for both France and Italy this morning are worth noting.
The US Dollar steadied against its peers yesterday, still suffering slightly from a loss of momentum despite last week’s strong labour data. Worries surrounding whether authorities are comfortable with Dollar strength lingered after Barrack Obama’s alleged comments on Monday.
There were a number of economic releases across the pond, although the effect on the Greenback was subdued. Importantly, however, job openings surged far more than expected in April, a sure sign that the US labour market is strengthening. The latest JOLTS report showed job openings rose by 5.044 million, up from 4.994 million in March, to the most listed job openings since the measure began in December 2000. Additionally, the quit rate also dipped marginally, down from 2% to 1.9%. Meanwhile, business optimism increased to a five month high in May according to the National Federation of Independent Business, with small businesses expecting a solid improvement in profits over the coming months. The index rose 1.4% to 98.3, with 8 of the index’s 10 components showing growth last month.
No more than second-tier announcements in the US today means the Dollar will likely be driven primarily by external and technical factors.
Rest of the world
The Kenyan Shilling strengthened yesterday after its central bank hiked the interest rate more than expected, by 150 basis points to 10%. Indonesia’s Rupiah tumbled to a seventeen year low on concerns of a slowing economy, while the Canadian Dollar strengthened following an uptick in crude oil prices.