Fed holds rates for now and UK growth waning
UK preliminary GDP figures for Q1 2016 came in as expected yesterday at 0.4%, showing a slight slowing in growth from Q4 2015. As a result, Sterling failed to maintain the strength it has seen from the start of the week. This morning, GBPUSD and GBPEUR have both opened lower. ‘Brexit’ talks and economic news from the States and Euro areas will take centre stage today, due to a lack of UK economic data releases.
The Fed left US interest rates unchanged last night, while leaving the door open for a June rate hike. The outcome was not surprising, however the Dollar bulls will be encouraged as the Fed dropped its reference to “global economic and financial developments” posing risks. There was a note of caution over slowing domestic growth, with the June decision being dependent on the path of US data between now and then. On the data front, US pending home sales gained more than expected for March, while US trade data was better than expected with a deficit of US$56.9bn for March – down from US$63.4bn in February which will raise GDP estimates slightly.
The Greenback did strengthen against the Pound from midday onwards, reaching highs of 1.4622 before the Dollar bulls regained control. The pair opened this morning at 1.4543, 0.55% lower than the highs posted yesterday.
The Euro Showed some strength in yesterday’s trading session as economic data from Germany beat expectations. We saw the GBPEUR track back down to 1.2830 levels as the GFK consumer confidence survey printed positively at 9.7.
The European Commision will release various data for April this morning. Consumer confidence, industrial confidence, business climate, services and economic sentiment indicator will provide some insight into whether March’s monetary policy changes are working.
Data to watch: 8.55am German April Employment Rate & Change. 10am Euro April Consumer & Industrial Confidence, Economic & Services Sentiment & Business Climate. 1pm German April CPI (MoM & YoY), Harmonised CPI (MoM & YoY). 1.30pm US Q1 GDP and Annualized GDP, April Initial & Continuing Jobless Claims, Q1 Personal Consumption Expenditures & Core PCE (QoQ)