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Pound May Rise on PMI Data, Fed-Speak to Inform Rate Hike Bets

Pound May Rise on PMI Data, Fed-Speak to Inform Rate Hike Bets

2016-05-03 07:38:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • British Pound may rise if firm UK PMI data boosts BOE rates outlook
  • Fed-speak to inform investors’ interest rate hike timelineexpectations
  • Aussie Dollar drops as RBA cuts rates, Yen gains and US Dollar falls

UK Manufacturing PMI data headlines the economic calendar in European trading hours. The report is expected to show sector activity growth accelerated for the second consecutive month in April. Recent UK economic news-flow has mounted a cautious recovery relative to consensus forecasts, cautiously hinting at scope for upside surprises. This may encourage the already-ongoing (albeit tepid) recovery in BOE rate hike bets, boosting the British Pound.

Later in the day, Fed-speak enters the spotlight as scheduled remarks from Loretta Mester, John Williams and Dennis Lockhart – Presidents of the Cleveland, San Francisco and Atlanta Fed branches respectively – due to cross the wires. Investors will comb through the comments in an attempt to decipher if the central bank’s move to de-emphasize risks from global headwinds in April’s policy statement was meant to telegraph a higher probability of hiking rates in June.

The Australian Dollar underperformed in overnight trade after the RBA cut the benchmark cash rate to a record low of 1.75 percent. Governor Glenn Stevens explicitly said the decision “follows information showing inflationary pressures are lower than expected,” suggesting stimulus expansion followed directly from last week’s disappointing first-quarter CPI data.

The Japanese Yen continued to push higher, with prices tracking S&P 500 futures lower to hint that eroding risk appetite stood behind gains in the anti-risk currency. The US Dollar traded broadly lower as front-end bond yields fell, pointing to continued erosion of Fed rate hike expectations. The move may follow on from disappointing Manufacturing ISM data yesterday. The report showed the pace of factory-sector activity growth slowed more than economists expected in April.

Losing money trading in the FX market? This might be why.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Weekly Consumer Confidence Index (MAY 1)

113.9

-

111.7

01:30

AUD

Building Approvals (MoM) (MAR)

3.7%

-2.0%

2.9%

01:30

AUD

Building Approvals (YoY) (MAR)

-6.5%

-14.0%

-7.2%

01:45

CNY

Caixin China PMI Mfg (APR)

49.4

49.8

49.7

04:30

AUD

RBA Cash Rate Target (MAY 3)

1.75%

2.00%

2.00%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

05:45

CHF

SECO Consumer Confidence (APR)

-15 (A)

-14

Low

07:15

EUR

ECB's Coeure Speaks in Paris

-

-

Low

08:30

GBP

Markit UK PMI Mfg SA (APR)

51.2

51.0

High

09:00

EUR

Eurozone PPI (MoM) (MAR)

0.0%

-0.7%

Medium

09:00

EUR

Eurozone PPI (YoY) (MAR)

-4.3%

-4.2%

Medium

09:00

EUR

European Commission Economic Forecasts

-

-

Medium

09:00

EUR

ECB's Mersch Speaks at Meeting in Frankfurt

-

-

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1290

1.1395

1.1465

1.1500

1.1570

1.1605

1.1710

GBP/USD

1.4420

1.4535

1.4604

1.4650

1.4719

1.4765

1.4880

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

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