By Jake Trask
Pound-bulls hoping for a split vote from the MPC minutes were left disappointed as it showed another 9-0 vote against raising borrowing costs. Since Mark Carney’s speech at Mansion House last week when he said that interest rates may rise “sooner than markets currently expect” there had been speculation that MPC hawk Martin Weale may have been the first to break ranks and vote for a rate rise however the publication showed this was not the case. Cable dropped from 1.6970 to 1.6935 where it found strong support. Later in the day we had the FOMC statement, economic projections and press conference. As expected, QE was tapered by another $10b taking it down to $35b. The economic projections showed that 2014 GDP estimate had been lowered to 2.1-2.3% from March’s estimate of 2.8-3% due to the poor winter weather. Hopes for an early interest rate rise were dashed as Fed Chair Janet Yellen used the press conference to play down expectations saying the Fed would keep rates at their current level for “considerable time”. Cable reached another multi-year high of 1.7017 this morning and currently trades at 1.7010. This morning has seen UK Retail Sales m/m print broadly in line with expectations showing a drop of 0.5% from last month. Later today see US Unemployment data and the monthly Philly Fed Manufacturing Index.
We expect a range today in the GBP/USD rate of 1.6935 to 1.7050
There was little Eurozone data in the past 24 hours with the shared currency reacting to events from the UK and America. GBP/EUR dropped from 1.2525 to 1.2475 after the MPC minutes. It moved up again on the back of the press conference in America but has retraced these gains to currently sit at 1.2480. EUR/USD gained on the back of the Fed to move up from a low of 1.3560 to currently trade at 1.3630. In the absence of any top tier data for the rest of the week holders of the shared currency will be looking to Mondays PMI releases and hoping for an improvement on last month’s poor numbers.
We expect a range today in the GBP/EUR rate of 1.2410 to 1.2550
The antipodean currencies gained from the FOMCs dovish tone with both the Aussie and the Kiwi gaining after the release. AUD/USD was trading at .9340 before the release and immediately jumped to .9410 where it found resistance. It has pushed on further at the start of the London session and currently trades at .9425. The Kiwi mirrored the Aussies move however a worse than expected GDP release has capped the gains. Growth for the first quarter printed 1.0% less than the 1.2% that was forecast. Although growth was less than expected New Zealand is faring much better than most of the rest of the developed world and holders of the Kiwi will be reassured about recent comments from the RBNZ about possible future rate rises. NZD/USD currently trades at .8725: GBP/AUD is at 1.8055 and GBP/NZD sits at 1.95.
We expect a range today in the GBP/AUD rate of 1.80 to 1.8150
We expect a range today in the GBP/NZD rate of 1.9445 to 1.9545
AUD: No data
EUR: German PPI m/m
GBP: Public Sector Net Borrowing
NZD: No data
USD: Unemployment Claims, Philly Fed Manufacturing Index
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