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A Busy Calendar with the EUR, the Pound and the Dollar in Focus

By:
Bob Mason
Published: Apr 28, 2017, 08:06 UTC

Despite the hopes of the more bullish on the EUR, Draghi managed to drag the EUR once more on Thursday afternoon, not only noting that risks to the

US Dollar Index

Despite the hopes of the more bullish on the EUR, Draghi managed to drag the EUR once more on Thursday afternoon, not only noting that risks to the Eurozone economy remain, despite downside risk abating, with inflation still the laggard as far as the ECB is concerned.

The weight on the EUR was evident by the end of the press conference, though what the markets think and what central banks think are not always aligned, as had been the case with the Dollar through much of the last 2-years.

Market sentiment towards near-term monetary policy will likely take centre stage through to the close, with 1st quarter, 1st estimate GDP figures scheduled for release out of the UK and the U.S, with prelim April inflation figures also scheduled for release out of the Eurozone.

Forecasts are for Eurozone inflation to accelerate in April, which will certainly be EUR positive, defying Draghi’s continued attempts to drag on the EUR, with this morning’s 1st estimate GDP figures out of France and Spain mixed, the French economy slowing in the 1st quarter, whilst Spain’s economy accelerated through the 1st quarter.

Perhaps the weaker GDP figures out of France can be attributed to the uncertainty surrounding the French election, with consumer spending figures out of France also on the slide in March, according to the numbers released earlier today.

The dovish messaging from the ECB has ultimately failed to peg back the EUR through the early part of the Day, with the EUR up 0.13% at $1.0887 at the time of the report. The French election first round result may have given the EUR a boost, but the run-off will need to go Macron’s way for an extended rally to kick in, with Trump playing a supporting role in weighing on the Dollar.

First estimate, 1st quarter UK GDP figures will be out shortly and forecasts are certainly not painting a rosy picture for the quarter, with private sector PMI and retail sales figures having been on the weaker side through the turn of the year. Inflation has been a bitter pill for the UK economy to swallow and with the BoE sitting back ahead of the UK General Election, there will be hopes that the pound manages to hold its ground supported by a solid majority in favour of the Tory Party, as the polls stand today.

Across the pond, things are perhaps even more interesting with the U.S administration having failed to ignite the economy through the 1st quarter, U.S GDP forecasts pointing to quite a slowdown, quarter-on-quarter.

As things stand, the markets are perhaps less convinced than the FED that there will be a marked acceleration in the 2nd quarter, the delays in policy roll out from the Oval office an added negative for the USD.

By the end of the day, the landscape will have certainly seen a slight shift and as things stand, monetary policy divergence continues to favour the EUR, despite Draghi’s best efforts, with both the BoE and FED looking to hold onto the forward guidance given through the first quarter.

Dollar weakness is expected to be the story of the day, while the pound may be somewhat more resilient than normal with the markets having already written off the 1st quarter, the upside in the pound having come off the back of the decision for a snap election, though judging by Chancellor Merkel’s comments on Brexit and trade negotiations, it’s not going to be an easy ride for May or for the pound for that matter.

At the time of the report, the Dollar Spot Index is down 0.01% at 99.07, with cable on the bounce, up 0.31% at $1.2935.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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