Nicholas Ebisch, FX Analyst
The dollar has started off the day immediately on the back foot. Several members of the Federal Reserve this week spoke to the press and general public commenting that the economic indicators that are necessary for a June rate hike have not been present lately. March hiring in the US was slow, retails sales fell, and home building data was softer than expected. Some dollar weakness during the day, or at least some volatile trading, can be expected as the market comes to terms with these latest comments from Fed members. Meanwhile, this morning will see the release of the Average Earnings Index 3 m/y, claimant count change, and the unemployment rate in the UK. Later, the US will release CPI m/m and core CPI m/m data, as well as consumer sentiment data in the afternoon.
GBP/EUR: Currently trading at - 1.3886
Yesterday this pairing peaked around the 1.3950 mark in the morning. This was likely a result of the further downgrading of Greece’s credit rating, leading to increased uncertainty over a Greek default. The single currency then managed to regain some ground in the afternoon closing at 1.3865. This move may have been a delayed reaction to the optimistic comments from Mario Draghi on Wednesday.
Today attention will be on the UK Average Earnings Index and Claimant Count Change (09:30). This will be followed by Eurozone CPI (10:00). With UK data expected to improve from last month and Eurozone CPI expected to remain negative, Sterling gains could be seen on the back of these releases.
GBP/USD: Currently trading at - 1.5000
Yesterday saw more weak data out of the US. Building permits came in at 1.04M, lower than forecasted and down from the previous month, and the number of Housing Starts increased less than forecasted by 0.02M to 0.93M. Unemployment claims remained under 300K but increased to 294K. In light of recent weak data, last night’s Fed speeches indicated an autumn rate increase might now be more likely. The dollar weakened against the pound yesterday afternoon and has continued to weaken this morning.
Today’s UK data include the results of the Average Earnings Index, forecasted to remain the same at 1.8% and Claimant Count Change, forecasted to decrease 29.0K. The US will release m/m CPI and Core CPI, both expected to remain at 0.2%. Fluctuations in today’s rate will continue as the markets react to the possibility of an autumn US rate increase.
EUR/USD: Currently trading at -1.0795
The euro continued to gain against the dollar yesterday on the back of relatively poor US data followed by US Fed member Lockhart’s uncertain outlook on the US economy, in which he stated that unexpected economic weakness means that it will likely take longer to raise short-term interest rates.
Today sees CPI figures released from both the Euro-zone and the US, so we could see significant market movement should the readings fall out of expectations. Later on in the afternoon the University of Michigan consumer sentiment survey is released and with the readings set to improve we may see some dollar strength. However we expect to see further euro gains for most of the day as the market digests Lockhart’s comments.
GBP/AUD: Currently trading at – 1.9163
Once the downward trend finally met resistance yesterday morning, the rate remained between 1.91 – 1.92 throughout the remainder of the day despite significant USD weakness.
With UK employments figures set to improve, and US CPI data to follow later on this afternoon, the pairing should see some movement today if figures fall either side of the forecasted level.
GBP/NZD: Currently trading at 1.9450
The kiwi dollar has so far managed to end the week where it began it against the pound, and is currently almost 3 cents higher than its peak on the 13th April.
Sterling investors will be hoping for some positive jobs data from the UK today. The release comes in the form of Average Earnings and Claimant Count Change. Both releases will have an impact on the value of the pound today and a good result would bolster sterling going into the weekend.
GBP/CAD: Currently trading at - 1.8224
We witnessed an early morning rebound by the pound yesterday, after Wednesday’s session saw the loonie surge against the pound due to the BOC latest projections. This battle for recovery did not last long as rising oil prices enabled the loonie to overturn momentum and close the day higher.
Today brings us Core CPI and Core Retail sales data from Canada in the early afternoon. Retail sales is expected to rise by 0.7 per cent and inflation to remain on target. With this in mind we expect the loonie to continue strengthening.
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