London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Apr 24 09 12:07 GMT |

EUR spiked higher in the London session on the release of the better than expected German IFO survey. Having traded in the 1.3190 area in early European hours, EUR/USD temporarily breached 1.3260 on the data release before it settled around the 1.3240 area. The expectations index of the IFO survey has now risen for three consecutive months. These rises, however, should be viewed as the real economy becoming less pessimistic rather than outright signs of optimism. EUR/GBP also surged on the back of this morning’s data releases. UK economic data was mixed with the impact of the worse than expected Q1 UK GDP data being softened by a decent set of March retail sales data. GDP fell -1.9% q/q, far more than the -1.5% q/q consensus expectation. This will undermine this week’s UK budget forecasts further. The Chancellor this week forecast UK growth as recovering to 1.25% next year and then to 3.25% in 2011. The big concern for UK markets at present is whether the UK government will be able to offload to huge increase of gilt supply. Clearly if growth expectations fail to meet will official forecasts (which seem likely in 2011), the official forecasts for public finances, which are already grim, will appear to be optimistic. The better than expected UK retail sales data at +0.3% m/m does provide a glimmer of hope and suggests that the low interest rate environment may be having an effect. However, many analysts see the Office of National Statistics’ credibility as being undermined over the past year since its office move. Next week’s CBI distributive trades survey will shine fresh light on the outlook for UK consumption. Given the dire outlook for public finances expect sterling to remain vulnerable in the weeks ahead. JPY held most of its gains during the European morning having rallied in Asia on talk of a possible downgrade of UK debt. Elsewhere Spanish Q1 unemployment at 17.36% reveals how badly hit by recession that economy has been, though ECB policy decisions will of course continue to be dominated by the economies of Germany and France. US durable goods and new home sales data provide a focus for the US session. Upcoming Economic Data Releases (Asia Session) expected prior 4/24 12:30 GMT US Durable Goods Orders MAR -1.50% 3.40% 4/24 12:30 GMT US Durables Ex Transportation MAR -1.20% 3.90% 4/24 14:00 GMT US New Home Sales MAR 340K 337K 4/24 14:00 GMT US New Home Sales MoM MAR 0.90% 4.70% Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.