U.K. manufacturing output increased for a 15th consecutive month in May. As a result Sterling gained for the first time in seven days. GBP gained .2% against EUR throughout London trading.
The gains were minimal due to Mortgage approvals falling to 62,918 from a revised 66,563 in March. That’s the third monthly decline after they reached a six-year high in January
The Euro currency lost against its major counterparts during trading Monday. This was prompted by poor German figures out in the morning session. German CPI fell by .1% month on month and only posted .9% growth year on year missing the forecast.
The market has started to price in the fact that Mario Draghi will have to confront the threat of deflation this week as he prepares to kick start the economy. Measures ranging from QE to interest rate cuts are widely anticipated, should these be utilized we should see a very volatile and potentially weaker Euro.
GDP in Sweden fell .1% in the first quarter, but more cause for concern is the below target CPI figures. Sweden’s central bank faces a “pretty serious problem” in tackling below-target inflation, Deputy Governor Per Jansson said. This is the second Scandinavian nation to release negative sentiment in the past two months. Expect some movement, due to possible government intervention.
Since Putin annexed Crimea in March, Russian stocks have become the most volatile since 2009. EUR/RUB volatility swings are now the most extreme on record while expectations for fluctuations in the currency against its emerging-market peers are at the highest in two years.
Sanctions are putting Russia at risk due to the fact that Russia is an economy built on commodity exports. Expect a more cooperative Russia and a more stable Rouble in the medium term.
Reserve Bank of Australia left interest rates unchanged at 2.5%. The move was widely expected by economists, although borrowers have been warned to brace themselves for interest rate increases next year as the non-mining sectors of the economy start to pick up pace.
The big news out today comes from Europe with CPI figures due at 10AM. If figures disappoint we would expect further weakness from the Euro. This could prompt a large movement and pricing in of a potential negative interest rate decision for Europe due on Thursday.
10:00 - EUR - CPI Inflation for May expected to remain unchanged at 0.7%
10:00 - EUR- Unemployment Rate for April expected to remain unchanged at 11.8%
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Daily Market Report - 03/06/2014