Newsletter – 25th May 2017

Morning Bulletin


  • There was a real lack of economic data due for release yesterday, particularly in the morning. We did however hear from a number of ECB members, who struck a cautious tone:
    • ECB VP Constancio: ECB must be careful not to withdraw stimulus measures too prematurely. It would be preferable to err on the side of caution, removing stimulus too late rather than too early.
    • ECB Chief Economist Praet: Upswing in Eurozone economy is becoming increasingly solid, but underlying inflation pressures still don’t provide evidence of a convincing upward trend.
  • The key speaker yesterday was ECB President Mario Draghi, and similarly to his colleagues he struck a slightly cautious tone, suggesting there was no need to deviate from the current path. Mr Draghi acknowledged the Eurozone was seeing “an increasingly solid recovery driven largely by a virtuous circle of employment and consumption”, but like Praet, he also stated “underlying inflation pressures remain subdued”.
  • Perhaps unsurprisingly with a lack of economic data, trading in the morning was fairly subdued with little movement in most currency pairs. Sterling however was the one exception to that rule, with a big sell off in the Pound occurring. There was no obvious reason for this move, perhaps down to jitters ahead of the Election on the 8thJune.
  • The afternoon’s key event was the Bank of Canada’s rate decision and as expected they opted to keep interest rates on hold at 0.50%.
  • The BOC’s Governing Council stated current level of monetary stimulus was still appropriate and that inflation was broadly in-line with previous projections.

  • There were some slightly mixed signals coming out of the US Federal Reserve’s FOMC meeting minutes last night and as a result the US Dollar was very much on the back-foot in FX space.
  • Whilst Fed officials signalled that rates could soon be raised, and dismissed some concerns around inflation and consumer softness, a number of members also suggested it would be ‘prudent’ to wait for additional evidence that a bout of recent weak data was simply transitory before hiking rates again.
  • It was this sentence and language which some may feel gives the Central Bank an ‘out’, should economic data prove disappointing in the run up to the June meeting.
  • Whilst markets and economists still appear to expect a further hike in the Fed’s June meeting, doubt has been cast on any further hikes in 2017.

  • A few key pieces of UK data due this morning, the most important being first quarter GDP print at 9.30am, with growth of just 0.3% expected.
  • US Unemployment Claims is our only key release this afternoon, due at 1.30pm.
  • Trading could be subdued today with parts of Europe out for Ascension Day.
Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1551 -0.10
GBP/USD 1.2984 +0.07
EUR/USD 1.1239 +0.20
AUD/USD 0.7486 -0.22


Time (GMT) Region Data Release Forecast Previous
09.00 AUD RBA Assist Gov Debelle Speaks
09.30 GBP Second Estimate GDP q/q 0.3% 0.3%
09.30 GBP Prelim Business Investment q/q 0.3% -0.9%
09.30 GBP BBA Mortgage Approvals 40.8K 41.1K
13.30 USD Unemployment Claims 238K 232K
13.30 USD Goods Trade Balance -64.7Bn -64.8Bn
15.00 USD US Fed Member Brainard Speaks