Dollar Gains as Politics in Focus

Political headlines have been in focus as Trump withdraws from the Iran accord and the UK government suffered further Brexit defeats by the Lords.

Previous Day's Market Highlights

The dollar continued to make headway yesterday. Sterling-dollar briefly dropped below 1.35 after starting the session in the upper end of the 1.35-1.36 band, eking out a new low since January. Euro-dollar fell to new lows since mid-December in the 1.18-1.19 range. A softer euro kept sterling-euro near 1.14. Brexit risks as the government faced further defeats in the House of Lords weighed on the pound.
 
As had been largely expected, President Trump announced that the US would withdraw from the Iran nuclear accord. Oil prices fluctuated, falling ahead of the announcement before later paring losses. Fed Chair Powell said yesterday that central banks’ raising interest rates shouldn’t disrupt the global economy and downplayed the effect of recent monetary policy on capital flows into emerging market economics.
 
Despite last week’s sharp increase in Argentine interest rates to 40%, the Argentine pesocame under selling pressure again on Tuesday, alongside other Latin American currencies. It fell to record lows against the US dollar above 23 and fell to 31 against the pound. Sterling has gained 24% against the peso this year. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1416 1.1600 1.1302 2.57%
GBP/USD 1.3503 1.4376 1.3484 6.20%
EUR/USD 1.1827 1.2414 1.1825 4.74%
GBP/AUD 1.8202 1.8478 1.7930 2.97%
GBP/NZD 1.9417 1.9755 1.9171 2.96%
GBP/CAD 1.7504 1.8039 1.7373 3.69%

Today's Market Highlights

The calendar is still relatively quiet today, which may see limited currency movement. The US releases April Producer Price Index figures, which are projected to soften (13:30 BST). This could put some pressure on the dollar, but the impact will likely be relatively limited overall.  
 
This evening, the Reserve Bank of New Zealand is widely expected to keep interest rates on hold at 1.75% given that inflation fell to 1.1% in Q1, the low end of the central bank’s 1-3% target range. A relatively cautious tone could see a softer kiwi in overnight trading, but as always when no changes are expected, it’s the nuances in the guidance that are key. This is the RBNZ’s first interest rate decision under Governor Adrian Orr.

Today's Economic Calendar

Time Currency Release Consensus Previous
13:30 USD Producer Price index YoY (Apr) 2.8% 3.0%
13:30 USD Core PPI YoY (Apr) 2.4% 2.7%
18:15 USD Fed's Bostic Speaks
22:00 NZD RBNZ Interest Rate Decision 1.75% 1.75%
22:00 NZD RBNZ Monetary Policy Statement
23:00 NZD RBNZ Press Conference
00:01 GBP BRC Like-for-Like Retail Sales YoY (Apr) -0.8% 1.4%

Caxton