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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

Talking Points:

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

GMTCCYEVENTACTEXPPREV
23:30AUDWeekly Consumer Confidence Index (MAY 1)113.9-111.7
01:30AUDBuilding Approvals (MoM) (MAR)3.7%-2.0%2.9%
01:30AUDBuilding Approvals (YoY) (MAR)-6.5%-14.0%-7.2%
01:45CNYCaixin China PMI Mfg (APR)49.449.849.7
04:30AUDRBA Cash Rate Target (MAY 3)1.75%2.00%2.00%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
05:45CHFSECO Consumer Confidence (APR)-15 (A)-14Low
07:15EURECB's Coeure Speaks in Paris --Low
08:30GBPMarkit UK PMI Mfg SA (APR)51.251.0High
09:00EUREurozone PPI (MoM) (MAR)0.0%-0.7%Medium
09:00EUREurozone PPI (YoY) (MAR)-4.3%-4.2%Medium
09:00EUREuropean Commission Economic Forecasts --Medium
09:00EURECB's Mersch Speaks at Meeting in Frankfurt --Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.12901.13951.14651.15001.15701.16051.1710
GBP/USD1.44201.45351.46041.46501.47191.47651.4880

--- 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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