AUD gaps lower following the release of soft inflation data

United States Dollar:

GBP/USD pushed higher yesterday as traders returned to work after the long weekend. The pound was still reeling from the positive run of economic data released the previous week, namely the strong employment numbers. Cable traded to a high of 1.6839, but then lost ground as the USD strengthened through the New York afternoon session. US existing home sales data printed a little better than expected yesterday, thus supporting this move in the dollar, but overall, it was a fairly quiet day on the data front. GBP/USD has traded sideways since and opens this morning at 1.6810. The MPC minutes, released in the morning, announced an upgrade to Q1 2014 growth to 1.0%, but gains in cable are likely to be stifled by concern among the board regarding the state of UK’s current account deficit, which remains at 5.5% of GDP. Public sector borrowing is also due for release, and will likely influence the direction of GBP in the near term.

We expect a range today in the GBP/USD rate of 1.6770 to 1.6840.

Euro:

It was a steady start for EUR/USD yesterday. It traded a narrow range between 1.3790 and 1.3825 throughout the day. Eurozone construction output data was released yesterday and came in a little shy of market expectations. Moreover, French Flash Manufacturing and Services PMI was released earlier this morning and printed below market expectations at 50.9 and 50.3 respectively. This, in turn, saw EUR/USD drop from 1.3835 to a low of 1.38. Half an hour later, equivalent sets of data were released out of both Germany and the eurozone as a whole, but these numbers were better than expected. In result, EUR/USD bounced back to trade at 1.3831. The euro is therefore a little stronger vs. the pound, and GBP/EUR has dropped back to 1.2154.

We expect a range today in the GBP/EUR rate of 1.2100 to 1.2175.

Aussie and Kiwi Dollars:

AUD/USD gapped lower last night after Australian CPI printed below market forecasts at 0.6% in Q1 vs. expectations for 0.8%. AUD/USD dropped off a cliff from .9375 to .9295, as market participants now see RBA rate hikes as only a very distant possibility. It has underlined the most recent neutral stance taken by the central bank. Chinese HSBC/Markit Flash manufacturing PMI for April also printed on the soft side, the index coming in at 48.3. AUD/USD fell a bit more as a result and opens in London at .9275. NZD/USD has been flat by comparison and opens this morning at .8590. The range in NZD/USD is likely to remain flat in the run-up to tonight’s RBNZ interest rate decision and accompanying statement.

We expect a range today in the GBP/AUD rate of 1.8080 to 1.8180

We expect a range today in the GBP/NZD rate of 1.9500 to 1.9625.

Data releases for the next 24 hours:

AUD: No data
EUR: No data
GBP: MPC Meeting Minutes, Public Sector Net Borrowing, CBI Industrial Order Expectations
NZD: Official Cash Rate, RBNZ Rate Statement
USD: Flash Manufacturing PMI, New Home Sales