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The BoE and Local Elections Put the Pound in the Spotlight

Bob Mason
The BoE and UK local elections will put the Pound in focus. Stats out of the Eurozone and the U.S and trade talks will also need to be considered.

Earlier in the Day:

It was another relatively quiet day on the economic calendar. March building consent figures out of New Zealand and new home sales out of Australia were the only stats to consider early on.

For the Kiwi Dollar,

Month-on-month, building consents slid by 6.9% in March 2019. The slide came off the back of a sizeable upswing in January and February. Consents had surged by 13.4% in January and were up by 1.7% in February.

According to figures released by NZ Stats,

  • A total of 34,516 new homes were consented in New Zealand in the March year 2019.
  • Home consents in Auckland jumped by 24%, equivalent to 13,874 new homes.

The Kiwi Dollar moved from $0.66281 to $0.66272 upon release of the figures. At the time of writing, Kiwi Dollar was up 0.18% to $0.6635.

For the Aussie Dollar,

New Home Sales fell by just 0.1% in March, month-on-month. The decline came off the back of a 1% increase in sales in February.

According to the Housing Industry Association,

  • New home sales stabilized in the 1st quarter, falling by just 1%, quarter-on-quarter.
  • The 1% fall came off the back of an 8.5% slide in 2018.
  • Apprehension ahead of this month’s federal election reportedly contributed to weak sales.

The Aussie Dollar moved from $0.70221 to $0.70261 upon release of the figures. At the time of writing, the Aussie Dollar was up 0.14% to $0.7025.

Elsewhere,

At the time of writing, the Japanese Yen was down 0.15% to ¥111.55 against the U.S Dollar.

The moves across the major pairings came in spite of a mixed session in the Asian equity markets. While the markets in China and Japan remained closed, the Hang Seng found early support, up by 0.63%.

Things were not so good for the ASX200, which tracked the U.S majors into the red. At the time of writing, the ASX200 was down by 0.75%.

The Day Ahead:

For the EUR,

It’s another relatively busy day on the economic calendar. Key stats due out of the Eurozone include April’s manufacturing PMI numbers and German retail sales figures.

The focus will likely remain on Italy and Germany’s manufacturing PMIs. While France and Germany’s PMI numbers are finalized numbers, any revision to prelim numbers will test the EUR.

In the earlier part of the day, Germany’s retail sales figures will also need to be considered. Forecasts are EUR negative.

Outside of the stats, expect updates on trade negotiations between the U.S and China to also influence risk sentiment.

Positive updates would be supportive of risk appetite and the EUR.

At the time of writing, the EUR was up 0.10% at $1.1207.

For the Pound,

It’s a big day for the Pound. On the economic data front, April construction PMI numbers will provide the Pound with direction early on. The construction PMI will unlikely have a material influence, however, as the markets look ahead to the BoE monetary policy decision.

With the BoE scheduled to deliver its May monetary policy decision, the focus will likely be on the inflation report and BoE Governor Carney’s speech.

The BoE is expected to hold rates steady at 0.75%. Of interest will be whether there is any bias towards a rate hike later in the year. While the UK economy demonstrated resilience through the 1st quarter, hoarding in anticipation of Brexit was attributed to the better than anticipated figures.

Any shifts in sentiment towards growth and inflation will be key for the Pound on the day.

On the political arena, local elections will get underway this morning. Results are expected to begin trickling through overnight tonight. The Tories are forecasted to take a hammering, which should be negative for the Pound. Brexit woes and in party fighting have led to increased support for the Labour party of late.

At the time of writing, the Pound was up 0.05% to $1.3056.

Across the Pond,

Economic data due out of the U.S include 1st quarter nonfarm productivity and unit labor cost figures. The weekly jobless claims and March factor order numbers will also provide direction.

Following the FED’s fence-sitting on Wednesday, a bounce back in factory orders and a pickup in unit labor costs would be positive for the Greenback.

On the earnings front, there are no major corporate earnings releases due out of the U.S on the day to influence.

From the Oval Office, updates on trade negotiations between the U.S and China could also influence. Positive updates would likely lead to softer demand for the safety of the Dollar.

At the time of writing, the Dollar Spot Index was down 0.09% to 97.602.

For the Loonie,

There are no material stats due out of Canada.

A slide in crude oil prices through the week and some disappointing stats out of Canada have done the Loonie few favors. Despite a slide in the Greenback, the Loonie closed out Wednesday with a 0.43% loss to cut the current week gain to just 0.07%.

For the day ahead, the Loonie could find more support should the U.S – China trade talks deliver support for crude oil and risk appetite in general.

The Loonie was up 0.04% at C$1.3440, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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