Morning Report 30.04.2015
Nicholas Ebisch, FX Analyst
During last night’s Federal Reserve meeting, the Fed acknowledged that economic growth was poor during the winter months for a number of reasons, but they took a modest tone in the meeting, which didn’t affect the dollar too badly one way or another. There are still positive signs in the US economy in the form of low unemployment, good consumer confidence, and household incomes continuing to rise. However, Fed officials will want to see inflation picking up towards their 2% target and employment rates continuing to improve before they make a move on interest rates. Today’s data will include GDP m/m from Canada, unemployment claims from the US, and the Bank of Canada’s governor Poloz speaking in Ottawa.
GBP/EUR: Currently trading at 1.3820
Yesterday saw the euro strengthening against the pound as German Bund yields rose and confidence increased about the possibility of a Greek deal.
This morning session opened with the euro making further gains against the pound. With no data out from the UK today, attention will be on this morning’s eurozone data, including the Unemployment Rate and y/y CPI and Core CPI Flash Estimates. Forecasts see the data either matching previous releases or slightly improving on them, so we may see the euro continue to strengthen.
GBP/USD: Currently trading at 1.5434
Yesterday’s Advance GDP q/q came in much weaker than expected, at 0.2% instead of 1.0% and down from the previous quarter’s 2.2%. The pound gained 0.29% on the dollar as a result, and cable reached 1.545 for the first time since February. Last night, the Fed held rates, and the FOMC statement removed hints of a rate increase in June but indicated that recent poor US performance may be temporary.
In light of last night’s Fed meeting and with no UK data expected today, the focus will be on this afternoon’s US data. Releases include unemployment claims, forecast to come in down from the previous week at 290K, as well as Core PCE Price Index m/m, employment cost index q/q, and personal spending m/m. A strong showing from US data may see the dollar regaining some ground.
EUR/USD: Currently trading at 1.1164
In light of further weak data from the US, particularly a disappointing result from Advance GDP q/q, the dollar weakened, which found the rate reaching new highs since early March. This combined with strengthening from the euro as German Bund yields rose due to lessening deflation concerns and optimism about the possibility of a Greek deal. Last night, the Fed held rates and indicated it thought poor first quarter performance was temporary, so a rate increase remains a possibility for later in the year.
Data releases today include announcements from the eurozone of y/y CPI and Core CPI Flash Estimates and Unemployment Rate, as well as US unemployment claims. A positive showing from the US may see the greenback regain some ground against the euro as markets look for cues for a Fed rate increase, but otherwise a strong euro may continue to make gains.
GBP/AUD: Currently trading at 1.9453
A loss in confidence in the USD yesterday aided the pound, as high-yielding currencies such as the Aussie lost ground following weaker-than-forecast GDP data yesterday afternoon. This USD sell-off has continued this morning, and we have seen the UK market react in favour of the pound, pushing the rate above 1.944, regaining all of Tuesday’s losses.
With little data from either side of the pairing today, the focus again lies with US data. As jobless claims are forecast to improve, we could see some resistance to the current trend. Investors will also be looking towards AUD PPI and manufacturing performance data tomorrow morning. With the rate decision next week, we could see an exaggerated reaction to AUD data releases.
GBP/NZD: Currently trading at 2.0348
Last night saw the kiwi weaken after dovish RBNZ comments indicated a rate cut might be in the future if domestic demand weakens and inflation pressures fall. The RBNZ has ruled out an increase in rates for now and held the rate at 3.50%.
With no data out of the UK or New Zealand today, markets will focus on digesting last night RBNZ’s statement. Attention going forward will be on indicators of shifts in demand and inflation for hints at the direction and timing of a future rate change. We may see the rate remain range-bound.
GBP/CAD: Currently trading at 1.8593
The pound continues to be handed support even with a lack of UK data. A momentary dip was seen after Canada released data showing a 0.9 per cent decline in RMPI. This shift in momentum was short lived, as US GDP figures showed economic expansion fell short of the 1 per cent forecast, growing only 0.2 per cent. The pound was able to go on to close the day higher.
Today brings Canadian GDP data in the early afternoon, which is forecast to remain at 0.1 per cent. This will then be followed by a speech from Governor Poloz at 3.30pm. Investors will be honing in and gauging reaction to the speech, even more so after yesterday’s disappointing news from the US. A heavy downside risk will continue to weigh on the loonie throughout the day.
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