Eurozone growth dips. Euro pivots but pushes back

Claire Hogarth16/May/2014Currency Updates

GBP

London closed with sterling retracing its previous losses against the dollar and euro. Sterling was hit hard earlier in the week by a surprisingly dovish stance from the Bank of England. As it was far removed from market expectations, we saw a dip in the recent high levels of trading across the board. With no data out yesterday, sterling mostly sat on the side-lines and pivoted off events in the US and Europe.

Yesterday saw plenty of buying on the dips and clearly traders remain bullish on sterling’s long term prospects. With the recent carousel of strong data out of the UK showing little signs of slowing, most movement will continue to stem from the lyrics emanating from the BoE and MPC. Presently the limelight remains firmly on Threadneedle St, as the market continues to babble over the likely timescale of a change in IR.

No data out of the UK today.

EUR

We called a choppy day for the euro yesterday and events conspired to agree with expectations. London closed with the euro down against sterling and flat against the greenback. The Asian session has seen the euro push back somewhat.

Against the dollar it has staged a rebound from the previous 2 month low, though it appears investors booked profits on bearish positions ahead of the weekend. Data yesterday showed the Eurozone grew far less than expected at the start of the year. It’s a tricky situation for the euro right now with the market primed for the European Central Bank to take action against the staggeringly low levels of inflation and disparity in growth between the leading economies. Indeed the euro has fallen roughly 2% against the greenback since May 8th when Draghi convinced markets that he was ready to inject fresh stimulus measures next month.

Only data of note today is trade balance figures.

USD

London closed with the dollar dipping slightly against sterling and fairly flat against the euro although it did post modest gains. Overall it was a good day for the US yesterday with dollar gains being capped by the fall in yields. The jobless rate has crashed to a 7 year low. CPI has ticked up a little and the Philly survey came in in-line with expectations. Typically, the jobless rate dipping correlates with employers adding more jobs. If we do again see a spike in the employment rate then focus will once again shift towards the Fed with the market toying with the likely timescale and amount of tapering. If we do see a shift in the pace of QE then one would expect the dollar to pivot. The greenback continues to predominately move following the comments by the Fed, with their actions and words superseding the latest data releases.

Data of note today includes- building permits, housing stats, and we also have a Fed member talking.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.