The Pound declined against the Euro and Dollar over the bank holiday weekend and is likely to remain under pressure due to uncertainty over growth, the fiscal outlook, and this Thursday’s UK election. Also to note all eyes will be on today’s Manufacturing PMI which investors has been looking to increase to signal that the UK economy is showing more than just green shoots .
The Dollar declined against the Euro slightly while making gains against the Pound on Friday buoyed by improving domestic economic conditions and safe haven flows amid uncertainty amid credit concerns in Europe. The US economy continued to show signs that the pace of recovery is accelerating. GDP grew a robust 3.2% in Q1 while Consumer Confidence rose strongly to 57.9 in April, raising hopes that consumers maybe more willing to begin spending again. The thaw in consumer confidence was borne out in today’s US Consumption figures which rose 0.6% in March. The dollar appears well situated to maintain its gains as both improving domestic economic fundamentals and debt concerns hanging over Europe drive investors into the Greenback.
The Euro made gains against the Dollar and the Pound on Friday while declining slightly yesterday as the euro remains under pressure as investors remain sceptical of a rescue package for Greece. The Euro declined following the announcement of a €110 billion coordinated Euro Zone/IMF bailout for the beleaguered nation that will stretch over the next 3 years. Market reaction to the rescue package was modest with Greek bond yields easing only slightly. The spread between Greek vs. German 10-year bonds fell to 610 basis points from 662 on Friday. The rescue comes on the heels of ratings agency Standard and Poor’s downgrade of Greek debt to junk status and downgrade of Portugal’s credit rating, raising concerns that other Euro Zone countries at risk will also require assistance. How the Euro Zone will resolve the mounting deficits of its lesser performing member countries is casting a pall on the region, its currency and threatens to derail its fragile recovery.
Data released 4th May
UK 09.28 CIPS Manufacturing PMI (April)
UK 09.30 Consumer Credit (March)
UK 09.30 Mortgage Applications (March)
EU 10.00 PPI (March)
US 15.00 Factory Orders (March)
US 15.00 Pending Home Sales (March)
