Today’s European session was a rather busy one in terms of data releases. Final UK figures on first quarter economic growth confirmed economic activity slowing down in the nation, while inflation figures out of the eurozone surprised to the upside but failed to boost the euro. Out of the US, consumer spending and the reading for the core PCE index were among the releases attracting attention.
US consumer spending recorded a slight increase in May, rising by 0.1% month-on-month, in line with expectations but falling short of the previous month’s 0.4%. Consumption makes up for close to 70% of the US economy. In other US data, the May core PCE price index rose by 0.1% on a monthly basis. Analyst forecasts and April’s respective figure also stood at 0.1%. The number for April was the result of a downward revision from 0.2%. The dollar edged higher relative to the yen upon data release, eventually reaching a daily high of 112.24. The pair was last flat at 112.17.
Later in the day, the final reading of the University of Michigan consumer sentiment index for the month of June was released at 95.1. This was above the 94.5 expected but at its lowest since November of last year. Dollar/yen fell on the news.
Looking at the dollar index, which gauges the greenback against the currencies of six major US trading partners, it was last up on the margin after hitting a fresh nine-month low of 95.47 earlier in the day. The measure, which is down 4.8% over the quarter, is on track for its worst quarter in seven years.
In other news, the final figures for first quarter UK GDP were released today. Those showed the economy expanding by a meager 0.2% quarter-on-quarter. This was in line with projections and below the previous quarter’s 0.7%. On an annual basis, the economy expanded by 2.0% as expected and slightly above the previous quarter’s respective number at 1.9%. It is worrisome that UK consumers’ purchasing power is continuing to receive a blow as a result of the weakening sterling since last year’s Brexit referendum. Their spending power has contracted the most since the 1970s. If this is combined with the loss in confidence due to political uncertainty, the outlook looks even bleaker. Pound/dollar was on a declining path even before the data hit the markets but extended its fall after the numbers became public. The pair reached a low of 1.2958 during the European session while it last traded 0.2% down on the day.
In terms of data out of the eurozone, the June flash inflation numbers showed the inflation rate at 1.3% year-on-year, exceeding forecasts of 1.2% but slightly below May’s 1.4%. Core inflation, which excludes volatile food and energy items, stood at 1.2%, up from May’s 1.0% which also coincided with analysts’ projections. Headline inflation close to but below 2.0% is the European Central Bank’s target for inflation. Euro/dollar did not move much upon data release. The pair last traded above the 1.14 handle, 0.2% down on the day after advancing for three consecutive days.
Turning to Canada, the country saw the release of GDP data for April. Month-on-month, the Canadian economy grew by 0.2%, coinciding with expectations but below March’s 0.5%. This marks the sixth straight month of growth for the country and points to a strong start during the second quarter of the year given widespread sector growth. Versus the dollar, the loonie gained upon data release. Today it was lifted by higher oil prices as well, as Canada is a major oil exporter. Dollar/loonie looks set for its fifth straight day of declines after hitting a near ten-month low of 1.2946 earlier in the day.
Diverting from forex markets for a peek at commodities, gold was last close to being flat on the day, trading at $1244.45 an ounce. WTI and Brent crude were up 0.8% and 0.5% on the day, trading at $45.28 and 47.66 a barrel respectively.
