Daily Market Report 26/04/2013

Sterling continued to be buoyed by the news that the UK avoided a triple-dip recession, with sterling rising to a three month high against the euro as well as a two month high against the US dollar.

The news also took some heat off Chancellor of the Exchequer George Osborne, whose austerity program had recently been criticized by IMF Chief Christine Lagarde. Osborne commented “I can’t promise the road ahead will always be smooth but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future”.

Time will tell if this comes into fruition and although many economists are skeptical about George Osborne’s comments and believe that in the long term growth will stagnate; it does appear that we finally have some positive sentiment for the pound. The data also gives potential case for the UK to hold off from further quantitative easing in the near future, a factor that has weakened the pound in recent months.

The euro continued to be plagued by speculation of an interest rate cut, with Goldman Sachs weighing in with an expectation of a rate cut as early as next week. Disappointing European industrial data, service sector data, unemployment rates and weaker business confidence has had the market anticipating a rate cut fairly soon.

In afternoon session, the US dollar drew some strength as the US Department of Labour confirmed initial jobless claims fell by 16,000, surpassing a fall of 4,000. The news boosted the US dollar allowing it to regain some its losses against the pound earlier on the day.

Overnight, the Bank of Japan decided to maintain its stance on doubling monetary policy without outlining any additional measures in order to meets its inflation target. The yen strengthened off the back of this as the market was anticipating the BoJ to hint at increasing its monetary policy further.

Sterling has started marginally lower this morning as investors look to book profits on yesterdays move ahead of the weekend. The only notable data on today’s agenda will be first quarter GDP figures from the US, with the market anticipating the US to have grown by 3% from a 0.4% growth in the last quarter.

Key Announcements:

13.30pm – USD – Gross Domestic Product (Q1): Expected to increased to 3% from 0.4%.

13.30pm – USD – Core Personal Consumption Expenditures (Q1): Expected to improve to 1.2%.

14.55pm – USD – Reuters/Michigan Consumer Sentiment Index (Apr): Expected to improve to 73.2.