The pound had a mixed day yesterday, as a better than expected CPI inflation number shocked investors, coming out 0.1% above expectation and 0.7% above the Bank of England’s 2% target. Immediately after the release the pound gained ground across the board. However, as traders began to unwind positions and take some profit from the pound’s recent gains, the currency gave up these early gains. By the end of the day, the pound had gained 0.15% against the dollar but lost just shy of 1% against the euro, falling to a 1½ month low.
This morning we have had the release of UK employment and wage data. New unemployment claims fell less than expected; however, average weekly earnings rose by 0.1% in March and ILO unemployment fell by 0.1%. While investors were disappointed by the unemployment claims, the key focus was the rise in wages. Markets have long feared that inflation would outstrip wage growth and this will go some way towards narrowing that gap, if only marginally.
The single currency performed well yesterday, making significant gains across the board following a batch of positive Eurozone data. French CPI inflation data remained stable at 1.4%, Eurozone Q1 GDP was in-line with expectations at 1.7% and German current conditions rose by 1.9 points more than expected to 83.9. The only disappointing result was German economic sentiment, which rose less than expected. Off the back of the positive data and wider market uncertainty, the euro gained an average of 1% against the dollar and pound.
A lack of economic data releases today could see the Eurozone give up some of yesterday’s gains. However, if we see more uncertainty in wider markets the single currency could further exploit these weaknesses and make further gains. While the European Central Bank is meeting today, no interest rate change or announcement is predicted so this is unlikely to have any effect on the currency.
The greenback struggled yesterday as political tensions and mixed data weighed on the US currency. While industrial output shocked investors and rose by 0.6% more than expected, a notable fall in housing starts and building permits set the dollar on the back foot. This pressure was further increased when yet more negative rumours concerning the Trump administration were revealed later in the day.
A number of news outlets are reporting rumours that Donald Trump not only discussed matters of national security with Russian diplomats but also asked the now-dismissed FBI director James Comey to stop the investigation into possible collusion between national security advisor Michael Flynn and Russia. Off the back of this the dollar lost 0.15% against the pound and over 1% against the euro.
A lack of economic data releases today could see focus drift to wider markets to drive price movement. However, if there is any news relating to the ongoing political tensions we could see more pressure applied to the dollar.
The Aussie and Kiwi dollars slipped to multi-month lows against the euro overnight after positive Eurozone data provided the single currency with support across the board. This wider market pressure combined with the recent uncertainty in commodity prices has left the Antipodeans struggling over the last few months.
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