Euro up despite the weak inflation headline

United States Dollar:

GBP/USD was steady throughout much of the morning session yesterday. It dipped to a low of 1.6615 in the mid-afternoon but quickly bounced thereafter in response to what seemed to be dovish comments from Fed Chair Yellen. Although she said nothing much new the dollar weakened as she added that their extraordinary commitment to QE and low interest rates was still needed and would be for some time. US data was also on the soft side – Chicago PMI printed weaker than expected at 55.9 vs. expectations for 59.2. It saw GBP/USD trade to a high of 1.6680 in the late afternoon whilst it has steadied in Asia to open this morning at 1.6660. UK Manufacturing PMI and US ISM Manufacturing PMI will be the focus for markets today. The UK numbers have been strong recently (although printing under forecasts) so investors will be looking to this release as having the potential to take cable through 1.67. We expect a range today in the GBP/USD rate of 1.6590 to 1.6725

Euro:

It was a volatile day for the euro yesterday. European Flash CPI for March printed weaker than expected at 0.6% y/y. EUR/USD dipped to a low of 1.3745 but then jumped back higher as markets looked more closely at the numbers. The core inflation data was actually fairly positive and the weaker headline number was put down to a temporary fall in energy prices. We also witnessed quite a bit of month end euro buying and with the weak US data and dovish Fed tone EUR/USD pushed its way to a high of 1.3802. EUR/GBP also bounced on the month end demand and jumped to a high of .8295 yesterday. The range has steadied in Asia and EUR/USD opens this morning at 1.3790. German employment data has been released already this morning and along with European manufacturing data, printed broadly in line with market expectations. We expect a range today in the GBP/EUR rate of 1.2030 to 1.2130

Aussie and Kiwi Dollars:

AUD/USD was bid gradually higher overnight, firstly in response to strong Chinese Manufacturing PMI which came in at 50.3 vs. expectations for 50.1 and then in response to the RBA’s announcement to leave interest rates on hold. The weaker than expected Chinese HSBC Final Manufacturing PMI was pretty much shrugged off. Instead, with RBA Governor Stevens refraining from talking down the AUD too aggressively AUD/USD briefly popped through the 93 US cent level. NZD/USD has tracked AUD/USD higher over the last 24 hours and opens this morning at .8680.We expect a range today in the GBP/AUD rate of 1.7900 to 1.8080. We expect a range today in the GBP/NZD rate of 1.9080 to 1.9290.

Data releases for the next 24 hours:

AUD: Building Approvals m/m

EUR: Unemployment Rate

GBP: Manufacturing PMI

NZD: ANZ Commodity Prices m/m

USD: Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending m/m, IBD/TIPP Economic Optimism, ISM Manufacturing Prices, Total Vehicle Sales