Euro under pressure

The euro came under pressure last Thursday after weaker than consensus economic data out of the Euro area, falling to an intra-day low of almost $1.12 against the dollar (from over $1.13) and trading not much above this level as we kick off this morning.  The pound has also lost some ground to the US currency, hovering just below $1.30 at the off, but is essentially unchanged against the euro at circa 86.5p. Meanwhile, bond yields in the core markets fell after the soft Euro area data, with German 10-year yields declining by about 5bps from their intra-week high to trade at around 0.03%

The composite PMI for the Euro area fell for a second consecutive month in April according to the flash reading, led by a slowdown in the pace of activity in the services sector, though it still held above its January low. However, at just over 51, the index is signalling continued sub-par growth for a fourth consecutive quarter in the second quarter, which is certainly something for the ECB to chew on as it considers whether yet more stimulus is necessary to support the economy

Oil prices have spiked higher after the US effectively restricted oil supply from Iran. with Brent crude jumping to almost $75 per barrel. This brings the increase in prices over the past month or so to almost $10 p/b, which if sustained will begin to exert some upward pressure on headline inflation rates in the major economies

The key data release this week is probably first quarter GDP in the US on Friday. The consensus expects an annualised rate of growth of 2.2%, the same as in Q4 (albeit slower than in the middle part of last year) and ahead of estimates of the economy’s potential growth rate

Other data scheduled include the IFO Index of the German business climate tomorrow (Wednesday) and consumer confidence in the US (Friday)