Morning Report: 28 April 2015

28th April 2015 By: Ranko Berich

GBP Sterling’s rise continued yesterday, ahead of this morning’s crucial data release. Gross Domestic Product growth for the first quarter of 2015 will be out at 09:30 BST today, and with the general election campaign too close to call the data will be picked subjected to even closer scrutiny than usual. While strong growth in service sector output points towards a good result, retail sales have recently suffered from lower petrol prices. With median forecasts predicting 0.5% quarter on quarter growth, any result significantly higher or lower is likely to have a strong effect on sterling.

EUR The Greek debt epic continued yesterday, but the euro shrugged off any uncertainty and strengthened further against USD. German Import Prices rose 1.0% in March, another sign that the weaker euro will filter through to consumers eventually. The biggest news for the euro yesterday was the fact that Greek Prime Minister Alexis Tsipras had moved to side line Finance Minister Yanis Varoufakis from talks with Greece’s creditors. Instead of Varoufakis’s negotiating representative the Prime Minister chose Nikos Theocarakis, a UK trained economist reportedly on good terms with the Eurogroup finance ministers. The move could be the first sign that the Greek government’s resolve is weakening, and that concessions in order to gain bailout cash are a possibility.

USD The rally in oil prices continued to gain momentum yesterday, meaning more weakness for the United States dollar. Today at 14:00 BST The Case-Shiller House Price Index will be released, followed by Consumer Confidence figures from the Conference Board at 15:00. Also out at 15:00 will be the Richmond Manufacturing Index, a survey response aggregate by the Federal Reserve Bank of Richmond. Given the fact that US data has consistently underperformed in recent weeks and crude oil is rallying, truly strong outperformance from these mid-tier data releases would be needed to move USD significantly.

CAD Loonie again strengthened yesterday and this morning, helped along by rising crude prices. Reports emerged that net long positions on crude oil futures by Hedge Funds had reached an all-time high at the InterContinental Exchange. This is by no means an indicator that spot prices will certainly rise, but a sign that bullishness on crude is increasing, a good sign for beleaguered North American producers. Oil prices have been of critical important to the Bank of Canada’s thinking recently, and Governor Stephen Poloz can be expected to outline his latest approach during regular testimony to Canadian lawmakers today at 13:45. Poloz has taken a rather optimistic view of the economy of late. During today’s testimony he is sure to be questioned vigorously on issues like unemployment and inflation, as well as the Bank’s response through interest rates, making the testimony important for CAD.

UK news

  • Reuters. UK growth slowdown to put economy back in election spotlight: Britain’s economy slowed in the first three months of this year, data is likely to show on Tuesday, potentially dealing a setback to Prime Minister David Cameron who has staked his re-election bid on the strength of the recovery.
  • Guardian. Coalition has presided over plunge in living standards, says TUC: Trades Union Congress says 2010-2014 unique in seeing drop in real household disposable incomes, which combine wages, benefits, taxes and inflation.
  • Independent. EU exit would hit UK economy much harder than neighbouring countries, study finds: Leaving the European Union could cost Britain £224bn while other EU nations would suffer only minor economic losses if it withdrew, according to a major new study.