Euro Recovers from Lows

The euro recovered ground yesterday while the dollar softened. Eurozone inflation, US PCE, and Canadian GDP are in focus today.

Previous Day's Market Highlights

The euro gained yesterday as concerns eased that Italy would have to hold fresh elections. The single currency also received support as German inflation surprised to the upside, rising from 1.6% to 2.2%, which raised expectations for the upcoming Eurozone print.  While sterling-euro held above 1.14, it lost some ground, and it fell below the key figure overnight. Both sterling-dollar and euro-dollar moved higher as the dollar softened, in part due to a downwards revision to Q1 GDP. Cable tested 1.33, while euro-dollar regained 1.16 after hitting new lows since November on Tuesday.
 
The Canadian dollar jumped yesterday, pushing sterling-CAD back below 1.71 to its lowest levels since January. While the Bank of Canada kept interest rates on hold as had been widely expected, the statement was more hawkish than anticipated. The BoC said that April developments “reinforce” its view that higher interest rates will be needed.  

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1394 1.1478 1.1302 1.53%
GBP/USD 1.3313 1.3633 1.3204 3.15%
EUR/USD 1.1683 1.2009 1.1510 4.16%
GBP/AUD 1.7570 1.8241 1.7521 3.95%
GBP/NZD 1.9019 1.9702 1.9085 3.13%
GBP/CAD 1.7137 1.7567 1.7055 2.91%

Today's Market Highlights

UK figures out this morning include Net Lending to Individuals and Mortgage Approvals(09:30 BST), which may overall have relatively limited market impact. A rebound in Eurozone inflation could strengthen the euro this morning (10:00), with both the headline and core figures forecast to pick up. Expectations for a surprise to the upside are likely higher following yesterday’s positive German inflation print, but high expectations always risk disappointment.  
 
In the afternoon, a mixed GDP print could weigh on the loonie (13:30), with growth forecast to have softened from the previous month but increased on a quarterly basis. The US releases Personal Consumption Expenditures, the Fed’s preferred inflation measure, as well as the Chicago Purchasing Managers’ Index and Pending Home Sales (13:30, 14:45, 15:00). A softer Core PCE figure could weigh at least temporarily on the dollar.
 
Highlights tomorrow include the UK’s Manufacturing PMI and the US jobs report, including May NonFarm Payrolls and Average Hourly Earnings, which could see dollar gains.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Net Lending to Individuals MoM (Apr) £5.2B £5.4B
09:30 GBP Mortgage Approvals (Apr) 63.000K 62.914K
10:00 EUR Unemployment Rate (Apr) 8.4% 8.5%
10:00 EUR Preliminary CPI YoY (May) 1.6% 1.2%
10:00 EUR Core CPI YoY (May) 1.0% 0.7%
13:30 USD Personal Consumption Expenditures - Price Index YoY (Apr) 2% 2%
13:30 USD Core PCE YoY (Apr) 1.8% 1.9%
13:30 USD Personal Income MoM (Apr) 0.3% 0.3%
13:30 USD Personal Spending (Apr) 0.4% 0.4%
13:30 CAD GDP MoM (Mar) 0.2% 0.4%
14:45 USD Chicago Purchasing Managers' Index (May) 58.0 57.6
15:00 USD Pending Home Sales MoM (Apr) 0.4% 0.4%
15:30 USD EIA Crude Oil Inventories (25 May) -1.200M 5.778M
17:20 CAD BoC Leduc Speaks
17:45 USD Fed's Bostic Speaks
18:00 USD Fed's Brainard Speaks

Caxton