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UK GDP, Carney and Powell to Drive the GBP and USD

By:
Bob Mason
Updated: May 25, 2018, 05:07 UTC

With inflation continuing to be a problem for the BoJ, BoE Governor Carney and FED Chair Powell are scheduled to speak through the day, monetary policy divergence becoming every more evident in the markets at present.

Weekly Forex Technical Analysis

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, limited to inflation figures out of Japan.

For the Japanese Yen, it was another soft inflation number, with the Tokyo Core CPI rising by 0.5% in May, year-on-year, the annual rate of core inflation easing from April’s 0.6%, while also falling short of a forecasted 0.6% rise.

Inflation has continued to soften in recent months and will leave the BoJ in its current state of limbo on policy, the latest annual rate of inflation the lowest since the end of the 3rd quarter of 2017.

The Japanese Yen moved from ¥109.309 to ¥109.298 against the U.S Dollar, upon release of the figures, before easing to ¥109.53 at the time of writing, down 0.25% for the session, an easing of market jitters over North Korea and the possibility of a U.S – China trade war adding further pressure on the Yen.

Elsewhere, the Aussie Dollar was down 0.16% to $0.7564, weighed by a pullback in commodity prices and a bounce back in the U.S Dollar through the early part of the day, with lingering concerns over the cancellation of the North Korean Summit also weighing.

In the equity markets, it was a mixed bag, with the Nikkei finding support from the softer Yen, up 0.07% at the time of writing, with the CSI300 also in positive territory, while the Hang Seng and CSI300 saw red, down 0.26% and 0.16% respectively.

While concerns of a flare up in posturing, and possibly more, between North Korea and the U.S eased, uncertainty remains reflected in the mixed sentiment across the financial markets through the Asian session and, while there is some cause for concern, Trump has managed to deliver to date and expectations are that some form of an agreement will be achieved with North Korea.

The Day Ahead:

For the EUR, Germany is back in focus, with May’s Ifo business climate index figures scheduled for release. Following a weak first quarter and a pullback in consumer confidence, business confidence will provide further guidance on what lies ahead for the German economy, May’s prelim manufacturing and service PMI numbers suggesting that today’s figures will disappoint.

At the time of writing, the EUR was down 0.10% to $1.1708, with sentiment towards the Eurozone economy and today’s stats the key drivers, neither expected to be supportive.

For the Pound, economic data scheduled for release this morning includes 2nd estimate GDP and business investment figures for the 1st quarter, together with gross mortgage approval figures, the GDP numbers being the key driver early on.

The bulls will be hoping for an upward revision to 1st estimate figures, today’s figures considering actual rather than proxies, though a March widening in the trade deficit will be an issue.

Outside of the data, BoE Governor Carney is scheduled to speak later in the day, which could influence should the BoE Governor provide some insight into near-term policy, a possible need to support the UK economy with a return to policy easing post Brexit providing some incentive to hike rates sooner rather than later, April’s retail sales figures a tick in the box for the BoE hawks.

The Pound was down 0.09% to $1.3368 at the time of writing, with Carney and any surprise revision to GDP numbers key drivers through the day.

Across the Pond, it’s a particularly busy day for the U.S Dollar. Key stats through the U.S session include April’s durable goods orders and finalized May consumer sentiment figures, focus being on core durable goods orders that are forecasted to be Dollar positive.

While the data will be key, a scheduled speech by FED Chair Powell and FOMC members Bostic, Evans and Kaplan will provide further direction for the Dollar, the markets having eased expectations of a more aggressive rate path for the year. Any affirmation of the minutes by FED Chair Powell will provide some Dollar weakness, though the rest of the Committee is going to need to be on the same page.

As always, while the stats and the FED provide direction for the markets on policy, the Oval Office is there to have the ultimate say on the Dollar’s direction through to the close.

At the time of writing, the Dollar Spot Index was up 0.13% to 93.898, as it looks to move back to 94 levels for the first time since last December, with Trump, FED chatter and the stats to provide direction through the day.

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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