Headlines
Pound Brushes off Growth Data –
House Prices Rise
Euro Gains on US Dollar –
German inflation figures ahead
US Dollar Feeling the Strain before FOMC Announcement –
Dovish Comments Expected
New Zealand Dollar Softer Despite Trade Data –
Surplus Widens, but Confidence Falls
Sterling
Although the UK’s first quarter growth data printed below expected levels, the Pound shrugged off initial declines to close out the local session trading in a stronger position against the US Dollar and close to the 1.40 level against the Euro.
UK general election concerns and the slowest pace of growth since 2012 had a limited impact on Sterling yesterday and broad-based US Dollar weakness saw ‘Cable’ breach 1.53. Economists had forecast that GDP would slow from 0.6% to 0.5% in the first quarter of the year, but it actually eased to 0.3%.
On Wednesday the news that UK house prices climbed by a seasonally adjusted 1% on the month and 5.2% on the year in April lent the Pound support. Economists had predicted respective readings of 0.2% and 4.1%. Today’s CBI Reported Sales number may also inspire Sterling movement.
Euro
With economic reports for the Eurozone lacking on Tuesday, Euro fluctuations were limited.
However, the common currency was able to gain on its US peer as investors took the restructuring of the Greek debt negotiation team as a positive sign.
With the controversial Greek Finance Minister Yanis Varoufakis sidelined, hopes that the nation will be able to reach an accord with its creditors have risen.
In the hours ahead the Eurozone’s Consumer/Economic/Industrial/Services confidence measures could have a modest impact on the Euro (although most the gauges are expected to hold at previous levels). Investors will be taking more of an interest in the preliminary German inflation data for April. Should consumer price gains accelerate as projected, the common currency may advance.
US Dollar
The losses just kept coming for the US Dollar on Tuesday and the North American currency struggled against a number of its most-traded rivals.
The odds of the Federal Open Market Committee (FOMC) delivering dovish commentary on the subject of interest rate increases rose as yet another US report failed to live up to expectations.
Although the US Consumer Confidence gauge had been expected to rise from 101.4 in March to 102.5 in April, it actually fell to 95.2.
The Richmond Fed Manufacturing Index also printed at -6 rather than the -2 anticipated.
Given the recent run of concerning US data, a summer interest rate adjustment from the Federal Reserve seems incredibly unlikely. If the central bank uses today’s policy statement to push back rate hike expectations to the end of the year, the ‘Greenback’ may soften further. US first quarter growth data will be inspiring currency market movement prior to this.
The Canadian Dollar was able to advance above the 83 cents level against its US rival on Tuesday as investors responded to the latest subpar US data and looked ahead to today’s Federal Open Market Committee policy announcement.
A speech given by Bank of Canada (BOC) Governor Stephen Poloz also lent the ‘Loonie’ support. Poloz reiterated previous comments about the prospect of the Canadian economy recovering in the months ahead and once again implied that interest rates won’t be subject to additional cuts.
The week’s first Canadian reports are due out today, but the Industrial Product Price and Raw Materials Price Indexes are unlikely to have much of an impact with the FOMC announcement looming.
Rebounding iron ore prices and a weak US Dollar helped the Australian Dollar return to trending above the 80 US cents level on Tuesday.
However, the South Pacific currency has since pared some of these gains and lost ground against rivals like Sterling and the Euro prior to the influential Fed and RBNZ interest rate announcements. A softening in China’s Westpac-MNI Consumer Sentiment gauge was partly responsible for the ‘Aussie’s slip.
New Zealand Dollar
New Zealand’s trade data might have shown that the nation posted a wider-than-forecast surplus in March, but the ‘Kiwi’ maintained a dovish relationship with several of its currency counterparts ahead of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision.
If the central bank intimates that a rate cut is on the horizon, we can expect the New Zealand Dollar to extend declines during the Australasian session.
New Zealand’s Business Confidence index also declined from 35.8 to 30.2 in April.
Data Released Today
13:00 EUR German Consumer Price Index (YoY) (APR P)
13:30 USD Gross Domestic Product (Annualized) (1Q A)
13:30 USD Personal Consumption (1Q A)
19:00 USD Federal Open Market Committee Rate Decision (APR 29)