After yesterday’s dearth of data, news flows set to pick up

Today’s macro highlights:

  • USD - Durable Goods Orders (March)
  • EUR - ECB monetary policy & Draghi media briefing

After yesterday’s dearth of data, news flows set to pick up.

Wednesday’s session in currency markets was notable for its general absence of fundamentals. Yields were the primary focus, driving appreciation of the dollar, weakness in the Euro and leaving the pound sitting somewhere in the middle. This is set to change as the day ahead unfolds, with a handful high-profile data releases due from both sides of the Atlantic - although it’s still all going to be set against a backdrop of markedly diverging bond yields. If the data doesn’t throw out any surprises, then the existing trends may well be maintained.

We have UK mortgage approval data due out of the UK at 9.30am BST this morning. The market isn’t expecting to see any issues here as mortgage lending remains in demand against a buoyant housing market. It’s really only worthy of note insofar as there’s not much else being released from the UK today. It would take a big deviation from what is forecast for it to be seen as a concern at the Bank of England - the more meaningful direction will be seen from elsewhere.

12.45pm BST is when we will hear the latest monetary policy announcement from the ECB, followed by a press conference at 1.30pm. With Eurozone growth data starting to look a little soft, opinions are divided as to how Mario Draghi will react. There are two elements to consider here - the underlying interest rate and the bond buying or asset purchase program, which is being used as an artificial stimulus. The bond buying has to be concluded before we see rate hikes and there’s some expectation time could be called here before the year end. However, any indication that the lavish stimulus measures will continue into 2019 has the potential to accelerate the Euro’s sell-off against both the pound and dollar.

There are a couple of high profile readings out of the US this afternoon too, with the US durable goods orders at 1.30pm BST likely to be very much in focus. Tough talk on trade by Trump clearly has the ability to impact this figure and a drop from last month’s figure of 3% is expected, although in the longer term, there’s a belief by analysts that the figure will drift higher. That said, in the wake of recent dollar gains, any shortfall here could act as the catalyst for at least a brief pause in the run higher.

GBP/USD
After a rangebound 24-hour period, cable is languishing around lows for the week and struggling to find any upside. Further losses open up the way for a return to early March lows.  Mid-1.30’s looks likely, especially as the Dollar is picking up.

EUR/USD
The pair is very close to those early March lows having fallen in four of the last five sessions. A break below yesterday’s lows would open up a return to levels not seen since mid-January. A dovish ECB today could pull this pair below 1.2000.

GBP/EUR
Sterling is establishing a solid upward trend against the Euro and continuing to move away from last week’s lows. With this being driven by diverging yields, a return towards the highs from mid-April could be achieved. Another break of the 11-month high, seen earlier in the month, will pave the way higher.