The pound was sold across the board yesterday as participants chose to exit the currency ahead of crucial UK data points released this morning. Sterling fell below the $1.23 handle against the US dollar, shedding 0.90% on the day. The move was as painful against the euro which saw the price almost break €1.13 to the downside.
This morning has seen a raft of UK data released at 7 am including Q1 GDP, April trade balance, and manufacturing output. To the surprise of many both the GDP and manufacturing numbers have come in better than expected albeit heavily negative. Q1 UK GDP saw a contraction of -2% vs. -2.5% expected. Sterling has been lifted as a result, rising 0.15% against the euro and US dollar.
Overnight the Reserve Bank of New Zealand held interest rates firm at 0.25%. The central bank indicated that it would be willing to provide more accommodation down the line. They highlighted the threat to the economy from a slowdown in other regions including China and Australia. The Kiwi dollar finds itself down over 1% against the pound at the time of writing.
Later today, Fed Chairman, Jerome Powell, will make a speech at 1 pm UK time. Speculation has been rife that the US may adopt negative interest rates in the future. President Trump has consistently been applying pressure through tweets, urging the Fed to assume a similar position to the European Central Bank. Significant focus will be on Powell’s speech with many expecting him to confirm the Fed is not considering this option. If so, the greenback may be in for another round of buying.
Written by Viv Savani. 8:41am, May 13th 2020
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