BoE hold rates steady

Tom Tong11/Apr/2014Currency Updates

GBP

Sterling went in opposite directions against the dollar and the euro yesterday, gaining a little on the greenback, while falling consistently over the session against the single currency. It ended the session 0.4% down after solid euro data lent support to the currency.

The ECB’s monthly interest rate decision went by without event, as was largely anticipated. The UK will be hoping that worldwide data due out tomorrow doesn’t hit the pound too hard, and instead leave it in pole position to be the best performing currency of the week.

No data from the UK today.

EUR

The single currency had a strong day against the pound yesterday, trotting slowly upwards over the course of the day. It had clocked in around a half cent gain by the close, whilst also recording smaller gains against the greenback.

The raft of data out of the EU yesterday was generally quite poor, with only Portuguese inflation data, showing 1.4% MoM increase, coming in to the upside. French and Greek inflation, at 0.6% and -1.3% YoY respectively, was disappointingly poor. French industrial output grew at a meagre 0.1% in February, and Italian industrial output contracted half a percent in Feb, and just 0.4% YoY.

The event that weighed the most on markets yesterday however, was the Greek bond sale, which was executed after having orders taken on Wednesday. The government managed to raise 3bln euros at 4.95% – more money than expected and at a lower rate.

Spanish and German inflation came out this morning, with both measures pretty much bang on expectation. Germany saw 1% YoY growth for March, 0.2% down on February, which confirms the economic superpower of the Eurozone as following the worrying trend of its neighbours into disinflation. Spanish inflation actually came in better than expected at -0.1% as opposed to -0.2, although this of course, is still technically deflation.

That is it for Eurozone inflation today.

USD

The dollar had a quiet day yesterday, trading within narrow ranges across the board. The only noticeable movement came against the single currency, with the dollar falling foul of euro strength in the afternoon session.

Initial and continuing jobless claims did provide some encouragement, coming in at 300k and 2.776m, both readings under expectations. However, since FOMC minutes released this week effectively scrapped forward guidance for unemployment, dollars buyers have no reason to attach hope of interest rate rises to a fall in unemployment any more, hence the lack of reaction in the dollar.

Data out today includes producer inflation and consumer sentiment.

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Written by Tom Tong

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