Sterling
Sterling held its own after the bank holiday apart from against a well-performing US dollar yesterday afternoon. Though the UK currency fell against its American counterpart following strong US consumer confidence data, sterling steadily extended it's rebound from last week against most of it's major peers as expectation increases that the Bank of England will gradually move away from it's quantitative easing cycle. As reports throughout the week are forecast to describe a further extension of credit for the private sector as well as rising house prices, sterling could be supported approaching the Bank of England's interest rate decision in just over a week. If more central bank officials move towards supporting a reduction in Britain's asset-purchasing programme, the recently fragile currency has the potential to outperform in this quarter. With Confederation of British Industry sales data emerging today as well as word from one of the members of the Monetary Policy Committee, stay in touch to monitor progress throughout the week.
German import data held back the euro yesterday as figures indicated that demand in Europe's largest economy is slowing, whilst a French consumer confidence survey detailed another drop in the wake of France's government reforming labour laws earlier in the month in an attempt to stop a concerning rise in unemployment. Mixed policy signals also continue to emerge from Europe, with one central bank member yesterday speaking out that interest rates could be cut further if needed whilst others are concerned of the impact negative interest rates could have on periphery economies. Youth unemployment still remains a major issue, and the single currency may struggle to hold it's ground before the European Central Bank decision on interest rates on June the 6th. As the ECB presses on into uncharted territory and governments within the union continue to rely heavily on monetary policy, call in to Smart today for price movements and market reactions.
The US dollar rose to session highs against both the euro and Japanese yen whilst strengthening against all it's major trading partners including sterling as the latest consumer confidence survey and house price release yesterday afternoon exceeded expectations - rising to a five year high for May as sentiment was boosted by a better business outlook and job opportunities. The consumer confidence index climbed to 76.2; the highest since early 2008, whilst house prices are at their highest level in seven years giving consumers more confidence to spend. The news has added fuel to speculation the Federal Reserve may taper back it's quantitative easing programme in the near future as the world's largest economy posts more positive data reports. With more movement expected on Thursday as GDP data will be released alongside US jobless claims figures (and unemployment being mentioned as a key factor in Federal Reserve monetary policy decisions), stay on top of developments by talking to your trader now.
Elsewhere, the South African rand fell to fresh four-year low against the US dollar; as economic growth data from Africa's largest economy manifested itself in significantly worse shape than expected yesterday, and puts increased pressure on the central bank to loosen monetary policy toward a more assertive quantitative easing programme. Another currency weakening across the board was the Japanese yen as global equity markets rallied using cheaper borrowing from the country. A Bank of Japan member released a statement yesterday that it would be essential to keep both long and short term interest rates stable amidst perhaps one of the most intense monetary easing programmes in any economy currently. With more aggressive easing on the horizon markets are positioned for further yen weakness going forward, especially against it's US counterpart. Tomorrow sees Mark Carney address a Canadian dollar that struggled yesterday with his final decision on interest rates. Don't hesitate to call us for market reactions and feedback from your trader regarding your currency pair.
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