Euro rally

The Single European Currency
progressed to a high of 1.3130 following German Factory Orders
which surprisingly rose a further 2.2% in March, coupled with
rumours that Portugal will auction 10-year bonds for the first time
since the 2011 bailout amidst easing finance costs in Europe.
Nevertheless, it appears as though the powers that will be working
under the single currency are becoming gradually more dependent on
monetary support as Spanish Prime Minister Mariano Rajoy requests
the European Central Bank (ECB) to announce extra packages to
support small businesses, while Euro Group President Jeroen
Dijsselbloem said the region needs more tools to recapitalise
commercial banks as the ECB plans to conduct asset-quality review
of financial institutions.

Following comments from Mario
Draghi last Thursday, it appears as though the ECB are ready to
firm up the ailing economy; we should see the Governing Council
continue to embark on its easing cycle over the coming months and
the central bank may show a greater willingness to apply negative
interest rates in the euro-area as the region struggles to return
to growth. Therefore, the ECB monthly report due out Thursday may
fuel speculation for additional monetary support, and the EURUSD
remains poised to face additional headwinds over the near to
medium-term as the outlook for growth and inflation remains
weak.

Finally, back to the UK the Pound
has found a catalyst by the better than expected GDP number which
eradicates some of the short term fears regarding a triple dip
recession. Attention will now turn to the NIESR (National Institute
of Economic & Social Research) estimate of GDP for April for
further clues on the state of the UK economy. The Bank of
England Interest rate decision will also be a key
event. Recently there has been the view that more QE could
become available but as yet we have failed to see it. If we this
were to be announced expect rates to be pretty choppy following
this news. These data outcomes along with Industrial and
Manufacturing results will shape Sterling’s performance for the
rest of the month.