UK unemployment drops to 6.9%

United States Dollar:

Yesterday saw UK inflation fall as expected from 1.7% to 1.6% for March. The slowdown was attributed to a reduction in clothing and fuel costs. Cable dropped from 1.6690 to 1.6660 but immediately jumped to 1.6720 and remained above 1.67 throughout the day. Although falling inflation generally leads to a weakening of currency, this drop was slight and predicted and further narrows the UKs gap between the rising costs of goods and the rise in wages which the markets would have taken heart from. Americas yearly CPI rate increased from 1.1% to 1.5% broadly in line with expectations with rising food indexes offsetting a drop in energy costs. The increase will further increase the pressure on the Fed to raise rates sooner rather than later. This morning we have seen UK unemployment drop to 6.9% from 7.2% with GBP/USD currently trading at 1.68. We expect a range today in the GBP/USD rate of 1.67 to 1.6825.

Euro:

The monthly German ZEW survey showed a fall in confidence printing 43.2 (exp 46.3). This was a fall from 46.6 the previous month and was attributed to the volatile situation in Ukraine. Unrest continues in the East of the country with America calling for tougher sanctions against Russia as more pictures appeared in the news of what was reported to be Russian troops in and around the Eastern city of Donetsk. Germany will be wary of imposing further sanctions against Russia given its dependence on its gas imports. Despite the unrest EUR/USD remains well supported again getting a foothold above 1.38 and currently trading at 1.3840. GBP/EUR currently trades at 1.2135 after the aforementioned UK employment release. Later today we have the final CPI print from the Eurozone which is expected to show a fall to 0.5%. Despite ECB members recent talk of possible QE/LTOR3 it appears the Euro will remain in favour until Draghi and co take action. We expect a range today in the GBP/EUR rate of 1.2075 to 1.2150.

Aussie and Kiwi Dollars:

Overnight saw Chinas Q1 GDP release come out marginally better than expected at 7.4% (exp 7.3%). Although being the lowest figure in six quarters it wasn’t as bad as some were predicting and should mean that the government doesn’t have to impose further stimulus measures. The accompanying Industrial Production release showed a worse than expected 8.8% annual growth (exp 9.1%). After falling from .9395 after the US CPI reading AUD/USD found support at .9330 and currently trades at .9360. Overnight also saw New Zealand’s quarterly CPI release coming in at a worse than expected 0.3% (exp 0.5%). After mirroring the Aussies fall after the US CPI data the Kiwi fell from .8640 to under .86 on the back of this as investors pushed back the expected date of the next rate hike. We expect a range today in the GBP/AUD rate of 1.7850 to 1.80. We expect a range today in the GBP/NZD rate of 1.9450 to 1.96.

Data Releases for the next 24 hours:

AUD: NAB Quarterly Business Confidence Survey

EUR: CPI y/y

GBP: No data

NZD: No data

USD: Building Permits, Fed Chair Yellen Speaks