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Fundamental Market Overview

April 24
2017, 14:59GMT

EUR
Services and manufacturing activity in the Euro zone rose more than expected in April, suggesting that the region’s economy started the Q2 of 2017 with solid growth. HIS Markit reported on Friday that its Flash Purchasing Managers’ Index for the Euro zone’s manufacturing sector came in at 56.8, following March’s final reading of 56.2 and surpassing analysts’ expectations for 56.1. Furthermore, the Flash Services PMI came in at 56.2 in April, while markets anticipated an unchanged reading of 56.0 during the reported period. Thus, the Flash Composite PMI advanced to 56.7 from March’s 56.4, hitting its highest since April 2011. Economists stated that Friday’s PMI surveys provided enough evidence to say that the Euro zone economy started the Q2 with strong growth. In the meantime, the Flash Services PMI for the Euro zone’s largest economy, Germany, fell to 54.7 in April, down from the prior month’s 55.6 and below expectations for 55.5. The Flash Manufacturing PMI for Germany remained virtually unchanged, declining to 58.2 from 58.3 in March. Despite the stronger-than-expected release, the Euro failed to maintain its initial gains against the US Dollar and other major currencies, as investors shifted their attention to the first round of the French presidential election.

GBP
Friday’s data on British retail sales surprised many experts who did not expect such a notable change in March. According to the ONS, sales in the retail sector dropped 1.8% on a seasonally-adjusted basis, while analysts anticipated only a 0.3% decrease. Similarly, on a quarterly basis, retail sales lost 1.4%, which was the first negative contribution to GDP growth since the Q4 of 2013. The following decline was a result of a change in average store prices, which were continuously increasing since January. In fact, in March, consumer prices reached the highest peak since December 2014. In addition, in volume terms, goods bought in most of the sub-sectors, except for department stores and household goods stores, decreased. For instance, the amount of money spent in food stores in March advanced 0.3%, while the amount of purchased goods diminished 0.5% compared to the previous month. In contrast to traditional retail sales, data on online stores showed that British consumers in March spent on average 1.0B pounds per week on online stores, a 19.5% rise compared to the same period a year ago. Retail sales are tightly connected to consumer spending. Thus, weak retail sales combined with rising inflation suggest that consumer spending will unlikely provide a significant support to economic growth.

CAD
Canada’s inflation growth slowed last month as food prices dropped for the sixth consecutive month. Statistics Canada reported on Friday that the annual inflation rate declined to 1.6%, down from April’s 2.0%. Meanwhile, market analysts anticipated a gain of 1.8%. On a monthly basis, consumer prices rose 0.2% in March, unchanged from the preceding month, whereas analysts expected a climb of 0.4% during the reported period. Transportation costs advanced 4.6% on an annual basis but were offset by weak food prices, which dropped 1.9% year-over-year, and clothing costs. Among the Bank of Canada’s core inflation measures, the CPI-common, considered to be the best measure of inflation, remained unchanged at 1.3% last month. The CPI-median, a measure based on the weighted median, dropped to 1.7%, whereas the CPI-trim, which excludes upside and downside outliers, fell to 1.4%. Due to weaker-than-expected inflation data, the Central bank is set to keep its monetary policy unchanged for an indefinite period of time or until the inflation rate hits the BoC’s target of 2%. The Bank’s key interest rate remained unchanged at 0.50% since July 2015. Friday’s figures confirmed the view that inflationary pressures in Canada remained low and the recent boost was driven by the temporary oil price rise.

source Dukascopys
Disclaimer: This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.