Sterling creeps towards 1.42 on the Dollar
The Confederation of British Industry industrial trends orders index strengthened to well above forecasts, the first positive reading for over two years and the strongest reading since December 2017. Jon Cunliffe, the Bank of England Deputy Governor commented that the rise in house prices have been conspicuous, change to the pace of growth is expected as government support is withdrawn.
Sentiment for the Pound held as the US market opened and Sterling crept higher through the afternoon. Concerns for the impact of the Indian covid variant eased which limited Sterling selling. The Pound moved above 1.4150 to the Dollar and the Euro settled close to 1.1600.
This morning Sterling opens just below 1.4200 to the Dollar and 1.1600 to the Euro. UK consumer confidence printed a 14-month high for May and April’s retail sales volumes surged 9.2%, well above forecasts of 4.5% and the year-on-year increase printed at 42.4%.
US initial jobless claims declined to 444,000 in the latest week from a revised 478,000 previously and slightly below consensus forecasts of 450,000 while continuing claims increased to 3.75mn in the week from 3.64mn previously. The data indicated a gradual improvement in the labour market.
The Philadelphia Federal reserve (Fed) manufacturing index declined to 31.5 for May from 50.2 previously and below consensus forecasts of 43.0. There was also a slight slowdown in the rate of new orders and shipments growth. There was a solid increase in the number of employees while the workweek increased strongly.
There was a further increase in the prices paid index to the highest level since March 1980 while prices received also increased at a faster rate with the highest reading since May 1981. Companies were slightly less optimistic over the 6-month outlook and expect that prices will increase at a faster rate than inflation.
Despite elevated inflation readings, the data had only a limited market impact in currency markets. After regaining some ground on Wednesday following the Fed minutes, the US currency lost ground with expectations that the Federal Reserve will maintain a very dovish stance in the short term.
The Euro continues to grind higher against the Dollar and push towards the 1.2240 heading into the last trading session of the week. The currency pair are benefiting from upbeat market sentiment but a lack of major catalysts and slight cautiousness ahead of Eurozone PMI data will test conditions throughout the day.
Data to watch
07:00 – GBP – Retail Sales
08:15 – EUR – French Flash Manufacturing PMI
08:15 – EUR – French Flash Services PMI
08:30 – EUR – German Flash Manufacturing PMI
08:30 – EUR – German Flash Services PMI
09:00 – EUR – Flash Manufacturing PMI
09:00 – EUR – Flash Services PMI
09:30 – GBP – Flash Manufacturing PMI
09:30 – GBP – Flash Services PMI
12:00 – EUR – ECB President Lagarde Speaks
14:45 – USD – Flash Manufacturing PMI