Morning Report: 27 April 2016
27th April 2016 By: Ranko Berich
GBP Sterling enjoyed another good day yesterday, reaching fresh highs against both USD and EUR, and only falling back slightly in overnight trading. The British Bankers’ Association released its Mortgage Approvals figure, which was 45,100 in March, slightly less than expected. Today will be the first big data test for sterling’s nascent rally, with the release of UK Gross Domestic Product Growth in the first quarter of 2016. Survey data and labour market statistics suggest that the economy has probably slowed, but the extent of the slowdown remains uncertain and so today’s release has the potential to either confirm sterling’s rally or reverse it. This morning’s UK GDP data showed GDP growth slowing to 0.4% in the first quarter, leaving year on year growth at 2.1%. This is broadly in line with expectations, but does represent a slowdown from previous quarters.
EUR The euro enjoyed a boost against USD in the afternoon after the release of weak data in the US, but continued to weaken to sterling. No headline data was released, making for a largely quiet day for euro markets, with EURAUD being the notable exception which rose sharply on the release of weak Australian inflation data. Today has already seen the release of German Import Prices and GFK German Consumer Climate, both of which were substantially higher than last month and beat analysts’ estimates. Eurozone Money Supply Figures were also released this morning, showing lending to the private sector improving at 1.6% year on year, unchanged from last month.
USD USD has been trending lower against both sterling and the euro for the last couple of days, and fell further yesterday afternoon upon the release of weak Durable Goods Orders data. Core Durable Goods Orders, which exclude volatile items such as transportation, fell 0.2% in March, after a precipitous 1.3% decline in February. The rest of the afternoon’s data releases were largely unremarkable, with the release of no less than three separate surveys. Flash Services Purchasing Managers Index remained indicative of overall growth in the sector, while CB Consumer Confidence Fell and the Richmond Manufacturing Index beat expectations. Today at 19:00 the Federal Reserve will announce its latest rate decision, accompanied by an FOMC statement. Expectations for a change in interest rates are low, and a move is unlikely. However, the statement accompanying the decision may shed some light on the Fed’s intentions for the crucial June meeting, which is more likely to see a move.
CAD After a few days of sideways price action the loonie began to strengthen again yesterday, The Bank of Canada’s Governor Stephen Poloz gave a speech in which he said that the lower level of global exports and low interest rates in Canada may simply represent the new normal, and did not represent a sign of impending economic slowdown. Crude oil prices, in the meantime, continued to climb. No Canadian data will be released today, but US Crude Oil Inventories will be released at 15:30 BST.
- BBC. UK economic growth slows to 0.4% in first quarter. The UK’s economic growth slowed in the first quarter of the year, official figures have shown. Gross domestic product grew by 0.4% between January and March, down from 0.6% in the fourth quarter, the Office for National Statistics (ONS) said.
- Bloomberg. U.K. Economy Loses Pace as Services Slow, Manufacturing Shrinks. The U.K. economy lost momentum in the first quarter as services had their weakest growth for almost a year and industrial production continued to decline. Economic growth slowed to 0.4 percent from 0.6 percent in the final three months of 2015.