Sterling dips as Carney confuses. Market primed for today's US GDP

Claire Hogarth25/Jun/2014Currency Updates

GBP

London closed with sterling dipping against the dollar and euro following a slight change of tune from Carney on the likely economic scenario to prompt the first IR rise. We saw cable slide half a cent and the euro scuttle up following the unexpected comments.

The curtain raised on the Bank of England with Carney addressing the Treasury Select Committee. The Carney circus has been juggling the market recently, his speech last month nudged sterling up across the board after eluding to a quicker than expected IR hike. Yesterday the opposite was true. Carney said the most recent data, showing average wages again contracted in April, implied to him that the economy had more slack than originally thought. The MPC say they will lift IR prior to the slack being fully used up. More slack than expected means more time to wait and lower IR for longer. Hence the sterling slip up as it goes against what was said just last month; the mix of dovish and hawkish lyrics look set to continue and the market will continue to shift accordingly. The street is split on an IR hike over Christmas or Q1 next year, ultimately only time will tell.

Only data today is CBI reported sales figures.

EUR

London closed with the euro upper cutting against sterling after taking leverage from the BoE comments. Slight dip against the greenback, otherwise mostly bouncing around resistance levels across the board, increasingly the euro is trading range bound as traders are pranged over the possibility of further European Central Bank action.

The German IFO survey showed sentiment weakened more than expected in June, as concern grew among German firms that conflict in Ukraine and Iraq would hurt business. The euro remained unfazed and hardly shifted. Global uncertainty will naturally get people a little jumpy, but German fundamentals remain solid with strong unemployment, low inflation and buoyant construction.

Pressure remains on the ECB to ease policy even further in the coming months, especially after data on Monday showed that the wider Eurozone remains a mess.

No data out of the Eurozone today.

USD

London closed with the dollar up across the board following surprising data to the upside.

Stronger than called US housing and consumer confidence data increases expectations of a more hawkish tone from the Fed. New single family homes surged 18.6% to a seasonally adjusted rate of 504,000 in May, the highest since May 2008. Consumer attitudes also perked up to 85.2 in June compared to the last reading of 82.2.

Bundles of data being released today set the scene for an eventful day for the dollar. Key play will be Q1 annualised GDP. Set for release at 13.30 GMT and called around -1.8%. We also have Markit services PMI figures and personal consumption figures.

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Written by Claire Hogarth

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