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Pound May Ignore Soft GDP Data, US Dollar Aims Higher on FOMC

Pound May Ignore Soft GDP Data, US Dollar Aims Higher on FOMC

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Aussie drops on CPI, Japanese Yen gains on risk-off mood in Asia
  • US Dollar may rise amid risk aversion if Fed boosts June hike bets
  • British Pound may shrug off soft GDP data as Brexit fears recede

The Australian Dollar underperformed in overnight trade, dropping after disappointing first-quarter CPI data fueled RBA rate cut speculation. The sentiment-linked Canadian and New Zealand Dollars likewise declined while the anti-risk Japanese Yen advanced as risk appetite soured across Asian stock exchanges. The MSCI Asia Pacific regional benchmark equity index lost 0.5 percent. The cautious mood probably reflects pre-positioning ahead of upcoming monetary policy announcement from the Federal Reserve.

The rate-setting FOMC committee is expected to keep the benchmark lending rate unchanged, putting the spotlight on the statement released after the sit-down. Rhetoric suggesting that threats from global headwinds highlighted last month have yet to materialize may be taken to mean tightening is more likely to resume in June, boosting the US Dollar. It may likewise drive risk aversion, encouraging continuation of overnight trading patterns.

UK GDP figures headline the European data docket. The year-on-year growth rate is expected to slow to 2 percent, the weakest in three years. Interestingly, 12-month BOE rate hike expectations have firmed and the British Pound has traded higher even as UK economic data outcomes has deteriorated relative to consensus forecasts in recent weeks.

This apparent mismatch may be accounted for by receding risk of a UK exit from the European Union in the minds of investors. Indeed, mentions of “Brexit” have become less frequent in global news flow tracked by Bloomberg. If the risk premium associated with the June referendum on membership in the regional bloc is truly dissipating, then even soft GDP figures may be unable to inflict lasting pain on the currency.

Are financial markets matching the DailyFX analysts’ expectations? See our forecast here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Trade Balance (MAR)

117m

401m

367m

22:45

NZD

Exports (MAR)

4.20b

4.65b

4.24b

22:45

NZD

Imports (MAR)

4.09b

4.28b

3.87b

22:45

NZD

Trade Balance 12 Mth YTD (MAR)

-3838m

-3585m

-3294m

23:30

AUD

ANZ Roy Morgan Weekly Consumer Conf

111.7

-

115.8

1:30

CNY

Industrial Profits (YoY) (MAR)

0.111

-

-0.047

1:30

AUD

CPI (QoQ) (1Q)

-0.2%

0.2%

0.4%

1:30

AUD

CPI (YoY) (1Q)

1.3%

1.7%

1.7%

1:30

AUD

CPI Weighted Median (QoQ) (1Q)

0.1%

0.5%

0.4%

1:30

AUD

CPI Weighted Median (YoY) (1Q)

1.4%

1.9%

1.9%

1:30

AUD

CPI Trimmed Mean (QoQ) (1Q)

0.2%

0.5%

0.6%

1:30

AUD

CPI Trimmed Mean (YoY) (1Q)

1.7%

2.0%

2.1%

1:45

CNY

Westpac-MNI Consumer Sentiment (APR)

117.8

118.1

4:30

JPY

All Industry Activity Index (MoM) (FEB)

-1.2%

-1.3%

1.2%

5:00

JPY

Small Business Confidence (APR)

47.8

48.5

48.8

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Import Price Index (MoM) (MAR)

0.7% (A)

-0.6%

Low

6:00

EUR

German Import Price Index (YoY) (MAR)

-5.9% (A)

-5.7%

Low

6:00

EUR

German GfK Consumer Confidence (MAY)

9.7 (A)

9.4

Low

6:00

CHF

UBS Consumption Indicator (MAR)

1.51 (A)

1.45

Low

6:45

EUR

French Consumer Confidence (APR)

94 (A)

94

Low

8:00

EUR

Eurozone M3 Money Supply (YoY) (MAR)

5.0%

5.0%

Medium

8:00

EUR

Italian Consumer Confidence Index (APR)

115.0

114.8

Low

8:00

EUR

Italian Business Confidence (APR)

102.5

102.2

Low

8:00

EUR

Italian Economic Sentiment (APR)

-

100.1

Low

8:30

GBP

GDP (QoQ) (1Q A)

0.4%

0.6%

High

8:30

GBP

GDP (YoY) (1Q A)

2.0%

2.1%

High

8:30

GBP

Index of Services (MoM) (FEB)

0.2%

0.2%

Low

8:30

GBP

Index of Services (3M/3M) (FEB)

0.8%

0.9%

Low

10:00

GBP

CBI Retailing Reported Sales (APR)

13

7

Low

10:00

GBP

CBI Total Dist. Reported Sales (APR)

-

20

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1130

1.1214

1.1256

1.1298

1.1340

1.1382

1.1466

GBP/USD

1.4249

1.4408

1.4495

1.4567

1.4654

1.4726

1.4885

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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