GBP Awaits CPI, Slips from Highs

The pound has slipped back from a new high against the dollar. UK and Eurozone CPI and the BoC rate decision are in focus today.

Previous Day's Market Highlights

The pound softened despite a drop in the Unemployment Rate to 4.2%, the lowest since 1975, as wage figures were mixed. Average Earnings excluding bonuses rose to 2.8%, in line with forecasts, but held steady when including bonuses. Sterling-dollar reversed a new post-referendum high around 1.4375, which it hit prior to the morning’s UK data, and later slipped back below 1.43. Nevertheless, cable is still at some of its highest levels since the referendum.
 
A greater-than-expected decline in Economic Sentiment put pressure on the euro, and this saw sterling-euro again test (but fail to break) the 1.16 level. It last traded above 1.16 on 24 May, 2017. Euro-dollar reversed an early-morning break above 1.24 to edge down towards 1.2340.
 
US housing data, including Building Permits and Housing Starts, both surprised to the upside but had little immediate market impact, although the positive figures may have broadly supported the afternoon’s dollar strength.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1560 1.1600 1.1363 2.04%
GBP/USD 1.4292 1.4374 1.3965 2.85%
EUR/USD 1.2363 1.2477 1.2218 2.08%
GBP/AUD 1.8421 1.8509 1.8176 1.80%
GBP/NZD 1.9520 1.9644 1.9171 2.41%
GBP/CAD 1.7982 1.8382 1.7817 3.07%

Today's Market Highlights

Inflation is in focus this morning. First, the UK releases its March figures (09:30 BST). CPIis forecast to have held steady at 2.7% and core inflation to have risen to 2.5%, which will likely maintain expectations that the BoE will raise interest rates this year, perhaps as soon as May. This could be positive for the pound, although the greater risk may be to the downside and a sub-forecast release could weigh on the pound as lower inflation reduces pressure on the BoE to raise interest rates.
 
Shortly thereafter, the Eurozone releases final estimates of its own March CPI figures (10:00), with no revisions forecast for either headline or core inflation. Initial estimates found headline inflation at 1.4% and core inflation at 1.0%, respectively. The release may have limited impact on the euro barring any significant revisions.
 
This afternoon, the Bank of Canada is widely expected to keep interest rates on hold at 1.25% (15:00). However, the Canadian dollar could strengthen if the BoC strikes a relatively upbeat tone on the economy and is hawkish on future hikes given recent stronger inflation and labour market data, although NAFTA and trade will likely remain concerns.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP CPI YoY (Mar) 2.7% 2.7%
09:30 GBP Core CPI YoY (Mar) 2.5% 2.4%
10:00 EUR CPI YoY (Mar) 1.4% 1.4%
10:00 EUR Core CPI YoY (Mar) 1.0% 1.0%
13:30 USD Fed's Dudley Speaks
15:00 CAD BoC Interest Rate Decision 1.25% 1.25%
15:00 CAD BoC Rate Statement
15:00 CAD BoC Monetary Policy Report
15:30 USD EIA Crude Oil Inventories -1.900M 3.306M
16:15 CAD BoC Press Conference
20:15 USD Fed's Dudley Speaks
21:15 USD Fed's Quarles Speaks
23:45 NZD CPI YoY (Q1) 1.1% 1.6%
23:45 NZD CPI QoQ (Q1) 0.5% 0.1%
02:30 AUD Unemployment Rate s.a. (Mar) 5 5.5% 5.6%
02:30 AUD Employment Change s.a. (Mar) 31.5K 17.5K

Caxton