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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,

Talking Points:

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

22:45NZDTrade Balance (MAR)117m401m367m
22:45NZDExports (MAR)4.20b4.65b4.24b
22:45NZDImports (MAR)4.09b4.28b3.87b
22:45NZDTrade Balance 12 Mth YTD (MAR)-3838m-3585m-3294m
23:30AUDANZ Roy Morgan Weekly Consumer Conf 111.7-115.8
1:30CNYIndustrial Profits (YoY) (MAR)0.111--0.047
1:30AUDCPI (QoQ) (1Q)-0.2%0.2%0.4%
1:30AUDCPI (YoY) (1Q)1.3%1.7%1.7%
1:30AUDCPI Weighted Median (QoQ) (1Q)0.1%0.5%0.4%
1:30AUDCPI Weighted Median (YoY) (1Q)1.4%1.9%1.9%
1:30AUDCPI Trimmed Mean (QoQ) (1Q)0.2%0.5%0.6%
1:30AUDCPI Trimmed Mean (YoY) (1Q)1.7%2.0%2.1%
1:45CNYWestpac-MNI Consumer Sentiment (APR)117.8118.1
4:30JPYAll Industry Activity Index (MoM) (FEB)-1.2%-1.3%1.2%
5:00JPYSmall Business Confidence (APR)47.848.548.8

European Session

6:00EURGerman Import Price Index (MoM) (MAR)0.7% (A)-0.6%Low
6:00EURGerman Import Price Index (YoY) (MAR)-5.9% (A)-5.7%Low
6:00EURGerman GfK Consumer Confidence (MAY)9.7 (A)9.4Low
6:00CHFUBS Consumption Indicator (MAR)1.51 (A)1.45Low
6:45EURFrench Consumer Confidence (APR)94 (A)94Low
8:00EUREurozone M3 Money Supply (YoY) (MAR)5.0%5.0%Medium
8:00EURItalian Consumer Confidence Index (APR)115.0114.8Low
8:00EURItalian Business Confidence (APR)102.5102.2Low
8:00EURItalian Economic Sentiment (APR)-100.1Low
8:30GBPGDP (QoQ) (1Q A) 0.4%0.6%High
8:30GBPGDP (YoY) (1Q A)2.0%2.1%High
8:30GBPIndex of Services (MoM) (FEB)0.2%0.2%Low
8:30GBPIndex of Services (3M/3M) (FEB)0.8%0.9%Low
10:00GBPCBI Retailing Reported Sales (APR)137Low
10:00GBPCBI Total Dist. Reported Sales (APR)-20Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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