Market Steadies, UK Interest Rates and GDP Take Center Stage This Week
GBP
GBP/USD is currently trading at 1.2538 (interbank). GBP/EUR is trading at 1.1650 (interbank).
This morning, British consumers exercised caution in spending last month despite Easter’s impact on consumer behavior. April witnessed a 4.4 per cent year-on-year decline in retail sales, following a 3.5 per cent surge in March. Overall, sales for March and April combined showed only a slight 0.2 per cent increase compared to the same period last year.
Adjusted for inflation, this marked a decrease from March’s 1.9 per cent growth. Similarly, the British Retail Consortium observed a notable decline in retail sales values compared to the previous year.
In the upcoming week, market attention will be on the Bank of England’s update and the release of UK GDP growth figures.
Markets anticipate the BoE to maintain its key interest rate at 5.25% in the upcoming meeting. Furthermore, Andres Bailey’s subsequent press conference will be closely monitored for any insights on monetary policy.
Today’s Events (GMT):
00:01 - BRC Retail Sales Monitor (Apr) - Actual: -4.4% vs Forecast: 1.6%
07:00 - Halifax House Price Index (Apr) - Actual: 1.1% vs Forecast: 0.2%
09:30 - Construction PMI (Apr) - Forecast: 50.4
EUR
EUR/USD is currently trading at 1.0705 (interbank).
Yesterday, the HCOB Eurozone Services PMI for April experienced an uptick, signaling the strongest growth in nearly a year, surpassing the initial estimate. Increased demand played a significant role in the heightened output, with new business volumes expanding at the fastest rate since May of the previous year.
Today, ECB Chief Economist Philip R. Lane remarked that recent Eurozone data has bolstered confidence in inflation returning to the 2% target, thereby enhancing the likelihood of a first interest-rate cut in June.
Additionally, this morning saw a 0.4% decline in German industrial orders for March, contrasting with the expected 0.4% rise.
While Eurozone data remains relatively sparse this week, attention will be on the European Central Bank Non-monetary Policy Meeting, several speeches by ECB officials, and the latest Retail Sales data.
Today’s Events (GMT):
07:00 - German Factory Orders (Mar) - Actual: -0.4% vs Forecast: 0.4%
07:00 - German Trade Balance (Mar) - Actual: 22.3B vs Forecast: 22.4B
10:00 - Retail Sales (Mar) - Forecast: -0.7%
USD
The dollar index, measuring the currency against a basket of other major currencies, is currently at 105.21.
Last week, U.S. Nonfarm Payrolls (NFP) and April Services PMI data revealed weak labor demand, a rise in the Unemployment Rate to 3.9%, sluggish wage growth, and a decline in Services PMI to an almost 16-month low of 49.4. These conditions suggest the economy is struggling within the Fed’s restrictive framework.
Yesterday, New York Fed President John Williams indicated eventual rate cuts. He noted moderating job growth and stated that the Fed is assessing the “totality” of the data.
The Federal Reserve is still expected to reduce interest rates one to three times this year.
While U.S. data remains light this week, investors will be attentive to several speeches by Fed members.
Today’s Events (GMT):
16:30 - FOMC Member Kashkari Speaks
CAD
USD/CAD is currently trading at 1.3685 in today’s session.
A FX strategist from CIBC Capital Markets anticipates headwinds for the Canadian Dollar (CAD) in the near term as the BoC potentially edges closer to rate cuts relative to the Fed.
Crude oil prices have slightly increased, with Brent crude rising by 0.1% to $83.54 per barrel amidst challenges in the Middle East. U.S. West Texas Intermediate (WTI) has also seen a 0.09% rise, reaching $78.55 a barrel.
Today, the latest Ivey Purchasing Managers Index (PMI) for April is due. Market reaction is expected to be subdued with this mid-tier data release, while the remainder of the week offers minimal economic data from Canada until Friday’s release of the Canadian Unemployment Rate and wages data for April.
Today’s Events (GMT):
15:00 - Ivey PMI (Apr) - Forecast: 58.1
20:30 - BoC Senior Deputy Governor Rogers Speaks
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