Cable Wobbles on GDP, Dollar Finds Buyers

Market Drivers May 25, 2017
UK GDP misses
Oil turns volatile sends comm dollars
Nikkei 0.36% Dax 0.12%
Oil $51/bbl
Gold $1257/oz.

Europe and Asia:
GBP UK GDP 0.2% vs. 0.3%

North America:
USD Weekly Jobless Claims 8:30

A topsy-turvy night of trade in the FX market today as the greenback first saw selling across the board in the wake of yesterday’s less than hawkish FOMC minutes, only to see flows reverse in morning European dealing as EURUSD retreated off the highs while USDJPY inched its way back toward the 112.00 figure.

In UK cable followed its own path as GDP figures missed their mark sending the unit back to 1.2950. UK 2nd revision of Q1 GDP came in at 0.2% versus 0.3% eyed. On the bright side business investment popped up to 0.8% versus 0.2% forecast. The headline data certainly shows the wear and tear of high inflation on UK economy, but the Q1 data is backward looking and recent PMI readings show a rebound in Q2 activity, so are likely to demonstrate some improvement over the current data.

Still, cable saw nothing but selling in the aftermath of the report with flows accelerating as the dollar found a bid. Sterling has been having a very difficult time clearing the key 1.3000 level but remains resilient as 1.2900 figure continues to hold. It’s difficult to tell if the current spate of political tension caused by the terror threat in UK will have any negative consequences on the broader UK economy, but it was certainly an aggravating factor today.

In North America today the calendar is very quiet with only Weekly jobless claims on the docket so FX will have to look elsewhere for direction. The OPEC meeting as well the upcoming G-7 meeting could provide a few sparks later in the day, but overall the majors remain contained in relatively tight ranges with dollar still on the back foot as the market is increasingly becoming convinced that the Fed will only hike 2 times rather than 3.