- Eurozone gets some good news on retail data
- Commodity currencies strengthen overnight
- Lack of data leads to riskier appetite for currency markets
By Charlie Horsley
Sterling bounced yesterday as there was finally some positive UK economic data. Strong UK service sector results yesterday raised the chances of the prospect of a UK interest rate hike in August. There is still two months of data between now and then, however, but a continuation of positive news like this will be the good news the Bank of England will need to instigate an interest rate increase.
Eurozone gets some good news on retail data
The latest Eurozone Retail Sales Purchasing Managers’ Index (PMI) showed a much stronger picture compared to last month’s downturn, with retail sales picking up in Germany and France, in particular. Sales are also up on an annual basis, allaying some fears from disappointing Eurozone data in previous months.
Commodity currencies strengthen overnight
Commodity currencies gained during the overnight trading session in Asia. It was reported that the Australian Gross Domestic Product (GDP) increased by 1% in the first quarter, boosted by household consumption, government demand and stronger exports. Year on year growth rose to 3.1% versus an expectation of 2.8%. The Aussie Dollar gained on the news, however, one piece of reasonable economic data is unlikely to alter the Reserve Bank of Australia’s (RBA) cautious stance
and Australian interest rates are likely to remain on hold unless inflation begins to rise.
Lack of data leads to riskier appetite for currency markets
There is a lack of tier 1 data due to be released today, which should leave current currency trends in place. Equity markets are set to open higher, which would suggest that the risk we are seeing played out in the currency markets will continue into the European session. The upcoming G7 meeting this weekend may temper some of the current optimism, as US President Donald Trump will face his allies in Canada and the European Union for the first time since announcing that the steel tariff exemptions would lapse. Any escalation of the impending trade wars and market sentiment could sour rapidly.
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