- 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|
|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||Goods Trade Balance||-64.7Bn||-64.8Bn|
|15.00||USD||US Fed Member Brainard Speaks|