GBP/USD Falls to 1.40

GBP/USD fell to a two-week low as May BoE rate hike expectations waned. US data, central bankers, and Aussie CPI are in focus today.

Previous Day's Market Highlights

After falling on more cautious comments from BoE President Carney overnight, the pound remained subdued on Friday. Sterling-dollar inched lower towards 1.40 as the dollar saw a bid tone. Euro-dollar fell below 1.23 to a two-week low, while sterling-euro regained 1.14 as the euro softened. MPC Member Saunders, who was one of two MPC members to dissent in favour of raising interest rates in March, remained hawkish in comments on Friday.
 
Earlier in the week, sterling had hit a new post-referendum high against the dollar around 1.4375. However, the pound failed to hold those gains as inflation softened and wage growth and retail sales data disappointed, weighing on rate hike expectations. Carney’s cautious comments provided the final blow, pushing market expectations down to below 50%. Support for sterling-dollar may be seen around 1.3960, and UK data out between now and the BoE meeting, including Q1 GDP and the PMIs, will be key for both the pound and rate hike expectations.
 
Elsewhere, oil prices fell after Trump tweeted criticism of OPEC.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1422 1.1600 1.1363 2.04%
GBP/USD 1.4022 1.4374 1.3965 2.85%
EUR/USD 1.2273 1.2477 1.2218 2.08%
GBP/AUD 1.8280 1.8509 1.8176 1.80%
GBP/NZD 1.9462 1.9644 1.9171 2.41%
GBP/CAD 1.7882 1.8382 1.7751 3.43%

Today's Market Highlights

US data are in focus this afternoon (13:30, 15:00 BST), with mixed figures projected, which could keep the dollar in recent ranges. ECB Board Member Cœuré speaks at a conference on “Resolution in Europe: The Unresolved Questions” (15:00). Canadian dollar traders will keep an eye on testimony from BoC Governor Poloz before the House of Commons Standing Committee on Finance (20:30). RBA Assistant Governor Kentspeaks on “The Limits of Interest-Only Lending” (23:00). Likely of more interest for the Aussie will be Q1 CPI figures, with a mixed release expected.
 
The main event for the euro this week is Thursday’s ECB policy decision. Investors will keep a close eye on any discussion of the winding down of QE, a likely positive for the euro, but recent softer data could keep ECB President Draghi relatively cautious for the time being.
 
Other highlights include the initial estimates of Q1 GDP in both the UK and the US, out Friday. Slower growth in the UK could weigh on the pound. US growth is often slower in the first quarter, which could nevertheless weigh on the dollar.

Today's Economic Calendar

Time Currency Release Consensus Previous
13:30 USD Chicago Fed National Activity Index (Mar) 0.27 0.88
14:45 USD Markit Composite PMI (Apr) 55.3 54.2
14:45 USD Markit Manufacturing PMI (Apr) 55.0 55.6
14:45 USD Markit Services PMI (Apr) 54 54
15:00 USD Existing Home Sales MoM (Mar) 5.55M 5.54M
15:00 EUR ECB's Coeure Speaks
20:30 CAD Boc Governor Poloz Speaks
23:00 AUD RBA Assistant Governor Kent Speaks
02:30 AUD CPI YoY (Q1) 2.0% 1.9%
02:30 AUD CPI QoQ (Q1) 0.5% 0.6%
02:30 AUD RBA Trimmed Mean CPI YoY (Q1) 1.8% 1.8%
02:30 AUD RBA Trimmed Mean CPI QoQ (Q1) 0.5% 0.4%

Caxton