GBP heads higher despite little economic data

GBP ended last week on the up following decent labour figures. This week we’ll see the focus return once more to the Bank of England where speculation revolves around whether there will be an interest rate hike or not. All will be revealed early tomorrow morning when the BoE meeting minutes are released. If the BoE is hawkish about the inflationary outlook for the economy, then the markets will consider this to be a higher possibility of a rate increase, which is positive for Sterling. Other than that, the only other significant data due for release in the UK this week is UK Mortgage Approvals and UK Retail Sales figures – Both due out on Friday morning at 08:30 am.

The market has opened remarkably quiet this week for the Euro – perhaps as a result of the lack of liquidity from the Easter break. More than likely - traders will focus in on Wednesday’s PMI data and Thursday’s Draghi speech for further clues on monetary policy. They will look out from comments from ECB Governors on (to low) inflation and on the valuation of the euro. If Draghi says something on the issue then the market will take his hints into account. There is no significant data out of the Euro Zone today. For now, we will continue to watch how things in the Ukraine unfold and what impact this has on the single currency.

An improving job market and an increase in manufacturing production are driving US growth. Broad based improvement is good for the economy, jobless figures are down, house prices are rising, production figures are increasing and on the whole consumer confidence and market sentiment seems to have improved significantly in recently weeks – all of which is helping the US economy recover quicker than expected. The improved weather conditions are also having a positive effect in the retail sector. There are several key pieces of data on the US housing market this week. The Richmond Fed’s factory index due out later today, is expected to post a positive result of 2 this month up from a reading of - 7 in March, anything higher than zero signal expansion and would been seen as a significant improvement. There’s been some steady dollar buying activity recently on the back of strong U.S. economic numbers – market participants will more than likely be looking at the data this week for further support. Growth in the US is projected to reach 2.7 percent this year compared with 1.9 percent in 2013, according to a Bloomberg survey of economists, supporting the Federal Reserve’s outlook that the economy has improved enough to continue unwinding its bond-buying program.