Published: 15/05/2023 By ECAPSterling failed to find a clear direction on Friday following mixed GDP data. The UK economy grew by 0.1% in the first quarter of this year, raising hopes that the country will avoid a recession. However, GDP suffered a surprise contraction of 0.3% in March, which offset the optimism. Looking to this week’s session, today may bring muted movement as investors await tomorrow’s jobs report. The wage component data of the jobs report will be closely watched as inflation remains in double digits. Ultimately, the Bank of England has indicated that the decision on whether to hike rates again at its June meeting will hinge on the wage and inflation data released before then.
The Euro softened against many of its peers at the end of last week, as a lack of Eurozone data left the common currency without support. Moreover, lingering headwinds following the European Central Bank’s interest rate decision and recent downbeat data seemed to pressure the bloc’s single currency. The Euro could face more headwinds this morning as forecasters expect to see a slump in Eurozone industrial production. Adding to the week’s economic calendar, the Eurozone is to release revised data on first quarter GDP tomorrow. Market participants are expecting the bloc's economy to have expanded by just 0.1% in the three months to March. Although, some economists say stagnation has continued and could result in a recession later this year. Additionally, the more forward-looking ZEW Institute surveys of business conditions and sentiment in the region’s largest economy Germany are to be released the same day.
The US Dollar reclaimed the ascendency last week with the DXY index notching up its largest weekly gain since September last year. However, investors’ expectations for a pause in the policy-tightening process by the Federal Reserve are skyrocketing amid support from major United States economic indicators. US inflation and prices offered by producers for goods and services at factory gates - also known as Producer Price Index - have slowed down, and labour market conditions are softening due to tight credit conditions and a bleak economic outlook. This, in turn, indicates that the Federal Reserve could halt its aggressive policy-tightening spree to safeguard the economy from collateral damage. For further guidance, investors will keep an eye on the monthly Retail Sales data.