Both Eurozone GDP and Employment Rise Ahead of Key U.S. Inflation Data
GBP
GBP/USD has increased and is currently trading at 1.2610 (interbank). GBP/EUR has risen to 1.1650 (interbank).
The Pound has continued its ascent for the third consecutive session, leveraging a weakening U.S. Dollar and ongoing speculation about potential Bank of England interest rate reductions, which investors now expect could begin as early as June.
The latest UK Employment report for the three months ending in March, released yesterday, showed a further weakening in job market conditions, marking the third successive downturn. As anticipated, the Unemployment Rate increased to 4.3%.
BoE officials are particularly concerned about persistent high service inflation, which could hinder the disinflationary trajectory. This inflation is largely fueled by wage increases, currently much higher than levels conducive to achieving a 2% inflation target.
Following the labour market update, BoE Chief Economist Huw Pill noted, "Current wage growth rates significantly exceed levels that would align with achieving the 2% inflation target sustainably." Pill stressed the importance of maintaining a stringent monetary policy to exert downward pressure on domestic inflation. He also suggested that confidence over the summer might be sufficient to contemplate interest rate reductions
No significant events are scheduled for today
EUR
EUR/USD has risen and is currently trading at 1.0830 (interbank).
This morning, Eurozone's Gross Domestic Product (GDP) grew by 0.3% in the first quarter of 2024 compared to the preceding quarter, maintaining the same 0.3% growth rate on a quarter-on-quarter basis. On an annual basis, GDP growth was recorded at 0.4%.
Additionally, employment in the Eurozone increased by 0.3% in the first quarter of 2024, and by 0.2% in the EU, relative to the fourth quarter of 2023. Year-over-year, employment figures rose by 1% in the Eurozone and 0.7% in the EU.
Also this morning, Bank of France Governor Francois Villeroy de Galhau indicated that the ECB is very likely to commence interest rate cuts at its next policy meeting in June. His remarks suggest a consensus, although some more hawkish ECB policymakers have advocated for a more cautious approach to rate reductions after an initial cut in June.
Today’s Events (GMT):
10:00 - GDP (Q1) - Actual: 0.4% vs Forecast: 0.4%
10:00 - Industrial Production (Mar) - Actual: 0.6% vs Forecast: -0.3%
10:00 - Employment Change (QoQ) - 0.3%??
USD
The dollar index, tracking the currency against a group of major currencies, has dropped to 104.83, slipping below the key 105 level after producer price index data came in higher than anticipated.
Yesterday’s data showed a surge in wholesale inflation, with the Producer Price Index (PPI) increasing by 2.2% annually in April, up from March's revised 1.8%. This aligns with expectations. The Core PPI, excluding food and energy, rose by 2.4% year-over-year, matching predictions, and both the PPI and Core PPI advanced by 0.5% month-over-month in April.
Comments from Fed Chair Powell, indicating that the current stringent monetary policy should eventually reduce inflation, have influenced the dollar's downturn. Powell also expressed concern that inflation reduction might not be as swift as hoped, and sustaining price pressures could prolong reaching the Fed's 2% annual target.
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The focus today is on the latest U.S. inflation statistics, with forecasts suggesting a steady monthly headline inflation increase of 0.4%. Core CPI is expected to rise by a slower 0.3% in April, down from 0.4% in March, with annual headline CPI projected to ease to 3.4% from 3.5% last month and core inflation expected to slow to 3.6% from 3.8%.
Today’s Events (GMT):
13:30 - CPI (Apr) - Forecast: 3.4%
13:30 - Core CPI (Apr) - Forecast: 3.6%
13:30 - Retail Sales (Apr) - Forecast: 0.4%
13:30 - Core Retail Sales (Apr) - Forecast: 0.2%
17:00 - FOMC Member Kashkari Speaks
20:20 - FOMC Member Bowman Speaks
CAD
USD/CAD is currently trading at 1.3626 (interbank) in today’s trading session.
Yesterday, Canadian Wholesales Sales in March fell -1.1%, less than the expected -1.3% decline but still down from the previous month’s 0.2% (revised from 0.0%). Market impact was muted on the low-tier data release.
The BoC is projected to execute four successive rate cuts in 2024, with an additional reduction of 100 basis points planned for 2025.
Canada's pivotal role as the main oil supplier to the U.S., coupled with the wildfires approaching Fort McMurray—a key center of Canada’s oil sands industry producing around 3.3 million barrels per day—has led to a rise in oil prices. Brent crude is currently trading at $82.89 per barrel, up 0.62%, while West Texas Intermediate crude has recovered some losses, trading at about $78.30 per barrel.
Today's economic calendar is light, with Housing Starts and Manufacturing Sales data are scheduled for release this afternoon, which are expected to have minimal impact on the Canadian dollar.
Today’s Events (GMT):
13:30 - Manufacturing Sales (Mar) - Forecast: 2.4%
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