Central bankers set for a busy day as lack of volatility continues

Tom Tong08/May/2014Currency Updates

GBP

It was a data-light day yesterday in the UK, which was reflected in the tepid nature of the currency markets. Sterling traded within a 0.3% banding against the dollar, and although GBP/EUR was slightly more volatile there was no distinctive trend.

The UK Government came under pressure regarding its flagship ‘Help to Buy’ initiative yesterday, with the scheme being blamed for the rapidly buoyant UK housing market pushing prices beyond the reach of the middle income bracket. The AstraZeneca saga has also raised concerns over the UK’s potential status as an international business tax-haven.

The MPC’s interest rate decision will be announced today at midday.

No other data from the UK today, after house prices show a surprising increase under expectation, to 8.5% for the first three months of 2014, compared to the same period in 2013.

EUR

Trading was flat across the board yesterday.

Poor German factory orders set the trend for a disappointing day of data for the Eurozone yesterday, with French industrial data following that up with a 0.7% fall MoM for March. French imports outstripped exports once again, increasing the negative monthly trade balance to 4.9 billion euro.

The European Central Bank will also be setting interest rates today, and once again are expected to hold things steady at 0.25% for another month. While potential interest rate reductions are in the pipeline, Draghi is not expected to implement any new measures this month. More will be clear after the ECB’s spring economic update is released in the coming weeks. Draghi also speaks, which in recent experience has often led to market interest and subsequent pivots.

Elsewhere there are Spanish bond auctions and Greek unemployment figures.

USD

Even Janet Yellen failed to inspire the money markets yesterday, with only a slight retracement coming off the back of her testimony. Otherwise, the greenback was flat over the session.

In her congress testimony yesterday, the Fed Chair Janet Yellen highlighted two specific areas of economic concern, ‘geopolitical tensions’ and the waning US housing market. After a steady improvement since 2011, recent poor data in the housing sector, for example new home starts and mortgage approvals, is clearly playing on the mind of the higher powers. However despite this, Ms Yellen reaffirmed the Fed’s commitment to reducing asset purchases at the current rate.

There was some other data from the US yesterday, mainly around the labour market. It was decidedly mixed, with mortgage applications jumping 5.3% in the last week, non-farm productivity falling 1.7% in Q1 and labour costs increasing to 4.2%.

Today we have initial and continuing jobless claims and a couple of speeches from various Fed members.

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Written by Tom Tong

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