The British Pound is likely to rise if minutes from April’s Bank of England policy meeting reflect a hawkish tone shift, boosting interest rate hike speculation.
Talking Points:
British Pound May Rise as BOE April Meeting Minutes Reboot Rate Hike Bets
Aussie Dollar Gains as Core CPI Unexpectedly Rises, Firming RBA Outlook
See Economic Releases Directly on Your Charts with the DailyFX News App
The release of minutes from April’s Bank of England policy meeting headlines the economic calendar in European hours. Leading survey data shows the UK began to re-accelerate in 2015 after a protracted slowdown starting in October 2013. The rebound followed a pickup in the Eurozone, which accounts for close to half of UK export demand. Improving conditions have spilled over into inflation expectations, with the 5-year breakeven rate at a four-month high after bottoming in mid-March.
If all this translates into a hawkish tone shift in BOE rhetoric, the British Pound is likely to rise amid rebuilding rate hike speculation. As it stands, futures markets price in the first post-crisis increase in the benchmark lending rate in the first quarter of 2016. We remain short EURGBP.
The Australian Dollar outperformed in overnight trade, rising as much as 0.8 percent on average against its leading counterparts. The move followed the release of first-quarter CPI figures that showed the core year-on-year inflation rate unexpectedly rose to 2.3 percent. That marked the first increase since the second quarter of last year.
As we discussed in our weekly forecast, a break from disinflation seen in the second half of last year may delay further interest rate cuts from the RBA. Indeed, the Aussie rallied alongside a jump in front-end Australian bond yields, pointing to the outcome’s supportive impact on the monetary policy outlook.
FXCM, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials. FXCM, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXCM, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
Recommended Content
Editors’ Picks
AUD/USD jumps above 0.6500 after hot Australian CPI data
AUD/USD extended gains and recaptured 0.6500 in Asian trading, following the release of hotter-than-expected Australian inflation data. The Australian CPI rose 1% in QoQ in Q1 against 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY hangs near 34-year high at 154.88 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.