Nicholas Ebisch, FX Analyst
Yesterday saw the dollar sink even lower on the back of poor consumer confidence data. Investors are bracing themselves for the Federal Reserve meeting tonight, which is expected to be dovish. A patch of soft data from the US over the last few weeks has pushed the expectations of an interest rate rise back further into 2015, and tonight’s Fed meeting will reveal how the US central bank feels about the latest poor economic performance. UK preliminary GDP yesterday undershot expectations and came in at 0.3%, the lowest reading in two years, since April 25, 2013. However, the pound was not too adversely affected and soon recovered its losses. Today’s data will include advance GDP q/q from the US, along with an FOMC statement and the Federal Funds rate tonight. New Zealand will also release its official cash rate and an RBNZ rate statement later tonight, with little expectation of a drastic change in the RBNZ’s strategy.
GBP/EUR: Currently trading at 1.3986
Yesterday’s main data was the weaker-than-forecast q/q preliminary GDP from the UK, which came in at 0.3%. However, the pound maintained its strength against the euro.
UK housing inflation data beat forecasts this morning, with Nationwide HPI m/m at 1.0%. Eurozone data from this morning saw y/y M3 Money Supply come in slightly above forecasts at 4.6% and y/y Private Loans meet forecasts at 0.1%. Other data to be released today include German Prelim CPI m/m, forecast to come in at -0.1%. We may see the pound continue to strengthen.
GBP/USD: Currently trading at 1.5385
Sterling briefly weakened around the release of weak GDP data but quickly rebounded, steadily strengthening throughout the day and reaching a new eight-week high as the rate hit 1.53 for the first time since early March. The strong rate received further support from weaker-than-forecast US consumer confidence data – the CB index came in at 95.2, down from the previous month’s 101.4.
The morning’s session sees the pairing remaining above 1.53, as UK Nationwide HPI m/m beat forecasts at 1.0%, indicating a strengthening housing industry. The US will release several pieces of data this afternoon, including Advance GDP q/q and Pending Home Sales m/m, both forecast to come in lower than in the previous release, as well as the FOMC statement and Federal Funds Rate later this evening (7:00pm). The pound looks set to retain its strength against the dollar.
EUR/USD: Currently trading at 1.1001
With no major eurozone data and weak US consumer confidence data, yesterday found the rate reaching its highest point since the beginning of the month, maintaining a rate above 1.098 overnight and hitting 1.10 in this morning’s session.
Data out this morning found y/y M3 Money Supply and Private Loans meeting or improving on forecasts, after which the euro strengthened slightly against the dollar. Today’s US data releases include Advance GDP q/q, an FOMC statement, and a Federal Funds Rate announcement tonight. Barring any surprises from today’s US data, we may see the euro continue to strengthen against the greenback.
GBP/AUD: Currently trading at 1.9253
Following weaker-than-forecast UK preliminary GDP data yesterday morning highlighting a slowing UK economy for the first quarter of 2015, we saw the rate drop off throughout the course of the day, reaching a 10-day low of 1.9100. We did see the pound stage some resistance late last night, aided by a retreating US consumer confidence score.
Data from the US provides the main focus today, including GDP and home sales data along with the FOMC statement and funds rate decision this evening. With investors expecting the recent US decline to continue, a knock-on effect on high- yielding currencies could see the Aussie gains reversed.
GBP/NZD: Currently trading at 1.9934
Yesterday the kiwi saw some gains against the pound during the morning and afternoon sessions, before losing roughly a cent from the release of New Zealand’s trade balance data, which came in above forecasts at 631M, into this morning’s session.
With no major data expected from the UK today, the main data for the pairing will come from New Zealand. Tonight’s announcements include the Official Cash Rate and RBNZ Rate Statement, as well as m/m Building Consents. The pound seems set to retain its strength against the kiwi, barring any unexpected election news or RBNZ announcements, and may remain range-bound.
GBP/CAD: Currently trading at 1.8505
The rate moved in waves yesterday as neither side managed maintain the upper hand for long. The pound suffered an early blow when data showed UK GDP slowed to 0.3 per cent in the first quarter. This negative trend was not sustained, with the pound rebounding after UK Mortgage Approvals data was released, showing banks are lending more to businesses. Bank of Canada Governor Poloz defended himself against criticism regarding January’s surprise rate cut and reiterated the belief that the effects of the oil price shock will fizzle out towards the end of the year.
Today’s calendar brings Canadian RMPI data, which forecasters believe will show a negative change regarding consumer inflation. If correct, downwards pressure will be placed on the loonie.
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