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Bank of England getting all the attention

Bank of England getting all the attention

GBP
The Pound struggled on Friday, unable to make any headway against major currencies. After a brief respite following the US employment data release Sterling reverted to recent form, sliding just below 1.3500 against the Dollar. The Pound also fell beneath a significant technical level, reinforcing negative sentiment.

CFTC data revealed the number of bets on Sterling rising in value fell to 26,000 from 37,000 previously and there is likely to have been a further wash-out in positions since then which will tend to stem further Pound selling pressure.

Sterling benefited from UK markets being shut for the first May bank holiday. The Euro dipped below the 1.1360 level while there was a recovery to just above 1.3550 against the Dollar. Caution ahead of Thursday’s Bank of England statement will likely hamper the Pound this morning.

USD

The headline Nonfarm payrolls for April saw an addition of 164,000 which came in slightly below consensus forecasts of 190,000. Unemployment dropped to a 17-year low of 3.9% from 4.1% previously which was also below expectations of 4.0%.

The average earnings data saw an increase by 0.1% for the month whilst year-on-year rose to 2.6%. Both sets of readings below market expectations and there was also a downward revision to March’s figure. The weak earnings data instigated immediate Dollar losses but these were quickly reversed as reduced inflation concerns and expectations that the Federal Reserve (Fed) will continue their plan of gradual interest rate increases.

On the back of this, US Federal Reserve chairman Jerome Powell is due to take part in a panel discussion with regards to the monetary policy hosted by the Swiss National Bank in Zurich. Powell is expected to anchor the expectations of the June rate hike from the Fed.

We also expect Donald Trump to make an announcement on Iran today.

EUR

The Euro stayed below the big 1.20 figure as after the final session of last week, EURUSD was down 0.15% after disappointing data out of the Eurozone. Retail sales came in soft, below the market’s expectations at 0.1%.

The German service sector grew at its slowest pace in over 19 months whilst the PMI Activity Index was recorded at 53.0. The slide continues as the future outlook remains bleak and is weighing on the Euro.

The fall in EURUSD from highs around 1.25 to near 1.19 may have priced-in the slower pace of growth, but the ongoing soft tone in the data may threaten further declines and keep the Euro limited for the near term. The Euro has fallen into the consolidation range during the second half of last year and we might expect it to move further given the current soft state of the Eurozone data relative to the solid trend in the US.

Data to Watch:

07:00 EUR Industrial Production n.s.a. w.d.a. (YoY) (Mar)
07:00 EUR Trade Balance s.a. (Mar)
08:15 USD Fed’s Powell Speech
10:30 AUD Budget Release
19:00 USD President Trump Speech

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