11th May 2017 Market Update
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?? GBP – Sterling began yesterday morning on the front foot, pushing resistance levels against the euro and US dollar. With no data released from the UK, the pound’s gains seem to be riding on the wave of sentiment ahead of the election.
Today features the Bank of England’s ‘Super Thursday’, with the announcement of the interest rate decision, minutes from the monetary policy committee meeting and the quarterly inflation report. Any suggestion of an interest rate hike being brought forward should produce Sterling gains, particularly if another member joins Kristin Forbes in calling for an immediate hike. The NIESR GDP print could add to the volatility, but Manufacturing and Industrial Production readings may be largely overlooked.
?? EUR – ECB President Draghi spoke at 13:00 yesterday at the Dutch Parliament, on the extraordinary policy measures taken by the ECB since the financial crisis and the role that member states will have in maintaining growth and recovery. It was a quiet day for the single currency, which has lost significant ground this week against major pairs.
Today is again very quiet for data from the Eurozone, with only the Economic Bulletin report released. It would be a surprise to see the market react immediately to this and so the euro could remain vulnerable to the end of the week.
?? USD – The Export and Import index remained flat for the US and as a result, provided no movement to speak of. The US dollar did manage to claw back all of its early losses against the pound yesterday to close broadly where it opened.
Weekly Initial and Continuing Jobless Claims data may have a minimal impact for the Greenback in the early afternoon.
12:00pm – Bank of England Interest Rate Decision and Quarterly Inflation Report.
13:00pm – NIESR Gross Domestic Product Estimate.
13:30pm – USD Initial and Continuing Jobless Claims.
Our View: The pound seems resurgent but may be halted by strong resistance levels. The NIESR have indicated that the predicted inflation overshoot may be limited as a result of Sterling’s gains, easing pressure on the Bank of England to raise interest rates. This could mean that the pound remains at these levels for the foreseeable future.
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