FOREX: British Pound to Find Little Support From Modest Jobless Claims Drop

Overnight Headlines

• Japanese Yen, US Dollar Sold as Stocks Rebound in Asian Trade
• Australian Consumer Confidence Gain Fails to Stoke RBA Outlook
• Japan’s Wholesale Inflation Hits 28-Month High on Energy Prices

Critical Levels

The Euro and the British Pound scored modest gains in overnight trade, rising as much as 0.3 and 0.2 percent respectively against the US Dollar. The greenback sold off amid a broad-based recovery in risk appetite (see below).

Asia Session: What Happened

The Japanese Yen came under intense selling pressure as risk appetite recovered in overnight trade, spurring carry trades funded cheaply in the perennially low-yielding currency. The MSCI Asia Pacific regional benchmark index added 0.5 percent, with the move chalked up to bargain-hunting after stocks plunged the most in a month yesterday. Sentiment-sensitive currencies outperformed, with the New Zealand Dollar leading the way higher.

On the data front, an uptick in Australian Consumer Confidence failed to produce fireworks as sentiment remained near the 9-month low set in March, offering no meaningful boost to the outlook for RBA monetary tightening. Indeed, markets continue to price in just one rate hike over the next 12 months, amounting to a central bank that is second only to the perpetually dovish Bank of Japan in its modesty.

Japan’s Domestic Corporate Goods Price Index figures showed wholesale inflation accelerated to an annual pace of 2 percent in March, the highest in 28 months. Not surprisingly, energy prices led the metric higher, with the largest gains seen in petroleum and coal costs.

Euro Session: What to Expect

Stock index futures are pointing firmly higher ahead of the opening bell, hinting the recovery in risk appetite noted overnight is due to carry over into European hours and promising continued gains for risk-linked currencies against the safe-haven Japanese Yen, Swiss Franc and US Dollar. Needless to say, the higher-yielding Australian and New Zealand Dollars are poised to outperform.

UK Jobless Claims figures headline the economic calendar, with expectations calling for unemployment benefit applications to drop by a nominal 3,000 in March. The Claimant Count – a proxy for the unemployment rate – is forecast to hold unchanged at 4.5 percent. Despite the narrow improvement in the headline figure, the outcome would do little more than reinforce the standstill in the UK labor-market conditions in place since June, offering the British Pound little support in the aftermath of yesterday’s disappointing retail sales and inflation figures.

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