Thursday saw the Euro trading lower against the US Dollar (EUR/USD), but gaining ground against the Pound (EUR/GBP) and Japanese Yen (EUR/JPY) ahead of central bank speeches.
Representatives from the Federal Reserve, Bank of England (BoE), and European Central Bank (ECB) will all speak during Thursday’s session which could create some market movement. BoE Chief Economist Andy Haldane will speak later today and he’s been known in the past to create some significant market movement. Meanwhile, Japan will release it’s latest inflation reading overnight, economists expect the annual figure to drop from 1.1% to 0.7% in April, something which could be less than positive for the Japanese Yen exchange rate.
Today’s Euro Interbank Exchange Rates (correct as of 09:50):
EUR/GBP – 0.8728
EUR/USD – 1.1810
EUR/JPY – 130.736
In other news, Japan’s economy shrunk according to figures released overnight. The annualised first quarter Gross Domestic Product (GDP) rate slipped from a negatively revised 0.6% to -0.6%, far lower than the -0.1% expected.
Above update provided at 09:26 am 16/05/18
Markets have been digesting figures from Germany and the Eurozone; German Gross Domestic Product (GDP) printed at 2.3% on the year in the first quarter, down from the previous 2.9%. The quarter alone expanded by only 0.3%, short of the 0.4% forecast.
Additionally, Eurozone Industrial Production ticked up slightly in March on the year, but failed to reach forecasts. Output increased from 2.6% to 3.0%, below the 3.7% expectation.
EUR/USD Exchange Rate Could Climb if US Advance Retail Sales Prints Below Forecasts
The EUR/USD exchange rate might be able to recover some ground when the latest US Advance Retail Sales figures print later today. It’s thought the figure will reach 0.3% in April, much weaker than the previous month’s 0.6%. Any reading below the 0.3% could weaken the Dollar and allow some other currencies to gain ground. However, a reading above could do the opposite.
Japanese GDP Forecast to Contract, Could EUR Recover Ground?
Investors in the Japanese Yen will be focusing on tonight’s Japanese Gross Domestic Product reading. GDP in the first quarter is expected to contract by -0.1%, on an annual basis, a decline from the previous 1.6%, The quarter alone is expected to flatline at 0.0%, the previous reading was 0.4%.
‘We expect overseas demand, which has been fuelling real GDP growth, to slow for now. Based on Ministry of Finance trade statistics and the BoJ’s export and import price data, we estimate January-March 2018 real exports grew by 0.3% q-o-q, which is considerably weaker than the 2.5% q-o-q growth in October-December 2017.
‘Economic conditions overseas appear to have slowed overall in January-March, with PMI indicators in China and Europe falling off the January peak and the March PMI in the US below February levels. We think these conditions contributed to a slowdown in Japan’s real exports.’
EUR/GBP in Tight Range as Markets Digest UK and Eurozone Data
Meanwhile, the Euro to Pound (EUR/GBP) exchange rate has been in a tight range when disappointing economic data came from both the Eurozone and the UK. While the UK labour market seems to be creating many jobs with more people entering the workforce, wages are still less than inspiring. Employment Change data came in at 197K in the three months through March, but the Average Weekly Earnings number printed at 2.6%, a decline from 2.8%.
Senior Economic Analyst Stephen Clarke commented:
‘Britain started 2018 as it has spent much of the last decade, with more impressive jobs growth but little prospect of recovering from its disastrous record on pay. Employment has hit a record high, driven by male employment breaking the 80% barrier for the first time in nearly three decades.
‘While the return to pay growth is very welcome it remains anaemic and wages are still over £700 a year lower than they were a decade ago. The start fall in productivity in recent months suggests that a strong pay recovery remain some way off.’
Current Interbank exchange rates (as of 12:21):
EUR/JPY – 130.704
EUR/USD – 1.1893
EUR/GBP – 0.8790