US GDP and Janet Yellen in focus
Sterling lost momentum yesterday morning following poor data from the UK. Q1 preliminary business investment printed at -0.5%, substantially missing the 3.2% forecasted growth. This caused the Pound to fall against both the Dollar and the Euro, which was then reinforced by strong data from across the pond. The second Q1 GDP estimate came in as predicted and matched the first estimate of 0.4%, meaning Sterling sustained near the key 1.31 threshold against the Euro.
Ahead of the bank holiday weekend there is no key data due for release from the UK. Sterling will therefore be driven by market sentiment and data from the US again. Expect a turbulent start to next week, however, as EU referendum talks take centre stage before the PMI data releases due on Thursday.
In the US, pending home sales rose to the highest level in over a decade gaining 5.1% for April, well above the market expectation of a 0.6% rise. Durable goods orders and initial jobless claims also beat expectations, rounding up a positive day for the Dollar bulls ahead of Federal Reserve Chair Janet Yellen’s statement later this evening. Investors will be listening intently for any hints to a potential June rate hike, after the recent run of positive data. Fed Governor Powell spoke yesterday and remained generally upbeat on the economic outlook, stating that a further increase in interest rates may be justified fairly soon.
The Greenback had a fairly mixed day on Thursday, posting gains against the Pound but losing some ground against the Euro. GBPUSD opened the day at 1.4697, before reaching highs of 1.4738 in the morning. The Dollar fought back in the US session on the back of the data, and opens Friday at 1.4670. EURUSD provided little volatility as the markets wait on today’s speech from Yellen. The pair opened Friday at 1.1194, showing small gains for the Euro.
With no top tier data out of the Eurozone yesterday, the markets attentions were elsewhere, leaving the single currency open to overall market sentiment for any volatility. The Euro did post gains against the Pound, clawing back some of the recent weeks’ losses.
Data to watch: 1:30pm USA Q1 GDP second release. 3:00pm University of Michigan Consumer Sentiment Survey. 6:15pm Fed Chair Yellen Speaks.