US GDP sees USD weaken ahead of next week's Nonfarm Payroll report

This week has seen a divergence of fortunes between EUR and GBP with EUR/USD trading around its 100DMA to reach its highest level for over 2 months, while GBP remains flat against the USD, which has seen a bout of weakness this week on the back of poor Q1 GDP reading (0.2% vs. Exp. 1.0%, Prev. 2.2%). EUR has strengthened as both parties in the Greek negotiation strike a conciliatory tone and as Greece appear eager to make a deal, with the somewhat troublesome Greek FinMin Varoufakis appearing to take a less dominant role in negotiations after PM Tsipras shuffled his negotiation team. Talks will continue to be in the spotlight next week, with Greece set to pay a combined EUR 1bln to the IMF split up between May 6th and 12th.


EUR/GBP has risen over 3% this week as GBP failed to make any ground against the week USD, with concerns building surrounding the British political uncertainty. Ahead of the UK General Election, all leader debates are now over and polls suggest that the voting public are no closer to deciding a winner, with most polls suggesting just a couple of percentage points difference in popularity, with neither Labour or Conservatives predicted to get a majority. Concerns are further heightened by party leaders Cameron and Miliband both skirting the issue of forming a coalition, particularly with regards to the SNP, who pollsters this week suggested could win every single Scottish seat. With this in mind, political uncertainty could not only continue to ramp up until the election day itself on Thursday, but perhaps beyond results as negotiations are made between parties to assess if a coalition could be made, who it would consist of, or conversely if the UK may be run by a less influential minority government.

Looking ahead to next week, as well as the aforementioned UK General Election and Greek payments, participants will also be looking out for the RBA rate decision, with 24 out of 28 surveyed analysts forecasting a cut by 25bps; however AUD/USD broke above its 100DMA this week to trade at its highest level since January. Elsewhere, Friday will see the US Nonfarm Payrolls report which will be in particular focus this month after the previous reading printed a dramatically lower than expected number, and after the aforementioned weak GDP reading this week.