Pound at Risk on Dovish BOE Testimony, Euro to Look Past German GDP

The British Pound may see selling pressure if dovish commentary from BOE officials weighs on rate hike probabilities. The Euro is likely to overlook revised German GDP data.

Talking Points:

• Aussie, NZ Dollars Fall as Yen Gains Amid Risk Aversion in Overnight Trade

• Euro May Not Find a Meaningful Volatility Trigger in German GDP Revision

• British Pound at Risk if Dovish BOE Testimony Weighs on Rate Hike Outlook

The Australian and New Zealand Dollars underperformed in overnight trade, sliding as much as 0.5 and 0.6 percent respectively against their leading counterparts. The moves tracked a drop in S&P 500 index futures, pointing to risk aversion as the catalyst behind selling pressure facing the sentiment-geared currencies. The safety-linked Japanese Yen advanced, adding as much as 0.5 percent.

Looking ahead, a revised set of German GDP figures is expected to confirm preliminary estimates showing output grew 0.1 percent in the third quarter. The year-on-year growth is expected to register at 1.2 percent, the lowest since the three months through December 2013.

The outcome may have a relatively modest impact on the Euro considering its limited implications for the near-term ECB policy. The central bank introduced a diverse medley of stimulus measures over recent months and is probably in wait-and-see for now while President Mario Draghi and company continue to implement and evaluate these efforts.

Meanwhile, a roundup of Bank of England officials including Governor Mark Carney, Deputy Governor Jon Cunliffe as well as MPC members Kristin Forbes and Ian Mc Cafferty are due to speak before Parliament’s Treasury Select Committee. The dovish tone of the latest Quarterly Inflation Report will probably feature prominently in the discussion, which may weigh on the British Pound if traders walk away from the outing with a sense of a longer delay in seeing an interest rate hike.