The fall is unemployemnt is particularly poignant as the UK was in full lockdown between these months, and the data can be taken positively as this rate should hopefully improve as the UK continues with the easing of restrictions. Yael Selfin, Chief Economist at KPMG UK said yesterday “As the economy prepares to re-open fully and economic activity picks up, businesses have increased their hiring to meet the rise in demand”.

The Claimant Count Change which shows the number of unemployed people in the UK fell in line with the unemployment rate, falling from -19.4k to -15.1k. However, Average Earnings data wasn’t quite as positive and showed that people earned less on average between January and March, with the rate falling from 4.5% in the previous quarter, to 4%. This positive news pushed the pound to the highest level seen against the US dollar since February of 1.422.

The UK has benefitted from a raft of positive news of late – restrictions were relaxed further on Monday as indoor events were once again allowed to open and hospitality could begin serving inside. Concerns over the new Indian variant taking hold in the UK were also subsided a little as studies have proven the current vaccines could cope with the new variant effectively, and the UK is now offering those over the age of 35 their vaccinations. Prime Minister Boris Johnson spoke yesterday to say that there is no evidence at this stage of the Government needing to delay plans to remove all restrictions next month, contrary to recent reports. Johnson told reporters “I don’t see anything conclusive at the moment to say that we need to deviate from the roadmap. We’ve got to be cautious, and we’re keeping everything under very close observation – we’ll know a lot more in a few days’ time”.

This morning, Consumer Price Index was released and more than doubled from March to April, from 0.7% to 1.5%. This was above expectation of 1.4% and could provide the pound with a boost when markets open this morning. The Bank of England has stated that inflation is heading above its 2% target and will reach 2.5% by the end of the year, but that this will then slip back down to 2% in 2022 and 2023.

Looking Ahead

Looking ahead to Friday morning, Retail Sales figures for April will be released. This could be particularly interesting, as non-essential shops were able to open in April under the Government’s easing of restrictions. Expectation is for this rate to spike sharply, with economists predicting a rise from 7.9% to 36.8%, but we could see the Pound strengthen if this figure exceeds expectations.

Eurozone economic recovery

Postitive ECB Rhetoric and Economic Data Support Euro Rates

The euro strengthened against the pound throughout the course of yesterday, assisted by Preliminary Gross Domestic Product (GDP) figures for the first Quarter of 2021 being released yesterday morning, and showed no change to the previous and expected figure of -0.6% compared to the previous quarter, and -1.8% compared to the previous year.

Furthermore, we saw positive signals from the European Central Bank that the French economy could be on a good track to recovery after its’ slow initial rollout of its vaccination programme. Governor of the Bank of France, and ECB policymaker Francois Villeroy de Galhau spoke yesterday to say the French economy should grow by a minimum of 5.5% this year, and that he felt the French economy was performing better than its other European peers.

However, Villeroy also suggested that he did not think there was “any risk of a durable return to Inflation” in the Eurozone, and that the European Central Bank would remain ‘accommodative’. Consumer Price Index which is a measure of inflation, and the latest data for April will be released this morning. This figure is expected to fall from 0.9% in March to 0.6% in April, potentially in line with Villeroy’s guidance yesterday. If this figure is released lower than expected, we could see the euro reverse the gains seen yesterday.

The next key data releases of note will land on Friday morning, when Markit Manufacturing and Services Purchasing Managers Index (PMI) will be released for the bloc, and individually for France, Germany and Italy. The Composite (Services and Manufacturing combined) figure is expected to rise from 53.8 to 55.1 and could help to boost the value of the euro if data is positive as expected.

US Dollar Value Falls

The US dollar fell against a basket of major currencies yesterday for the fourth day in a row, including the pound which saw the interbank level break through 1.42 for the first time since February. This was further bolstered yesterday when Building Permits and Housing Starts data came in lower than expected in April. Permits for new construction projects fell to 1.76m compared to 1.77m expected, and construction of new family homes fell from 1.733m to 1.569m last month, all suggesting that consumer confidence remains frail, with the desire to spend remaining low. 

Minutes following the latest Federal Reserve Interest Rate meeting will be released on Wednesday which could provide some clues on how it aims to tackle its economical issues including surging Inflation, and more detail on its plans to help the US economy recover from the pandemic. US Consumer Price Index rose at its fastest pace in April since 2008, beating previous and expected figures, so it will be interesting to see if the FED provide any guidance on future monetary policy changes within the minutes released.

On Thursday, the latest Initial and Continuing Jobless Claims data will be released and are both expected to fall compared to the previous releases. However, considering the poor housing and spending figures released yesterday, this could go hand in hand with higher jobless figures so we could see some volatility for US dollar exchange rates if these figures are higher than expectations. 

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