UK GDP much stronger than forecast

Today's Highlights

RBA rate cut looks likely in April

NZ building data eases

UK GDP much stronger than forecast

FX Market Overview

It's the final trading day of the month and the Quarter. It is also a big day for UK and EU data, so volatility is absolutely assured today. Hold on to your hats.

I'll start downunder if you don't mind. Pressure is growing on the Reserve Bank of Australia to lower their base rate in response to a fall in commodity prices and concerns over future levels of Chinese demand for Aussie exports. We have seen oil prices fall again overnight to below $50 per barrel and that has an impact on not only the Australian Dollar but the Canadian and Norwegian currencies. So an interest rate cut from the RBA in April is a strong possibility and the markets appear to be thinking along those lines; hence the weakness in the AUD this morning.

Across the Tasman Sea, things were equally nervous. A fall of 6.3% in building permits created some concern that the 4 years of growth in new builds may be petering out. That will be welcome news in the halls of the NZ government but it is a worry for economists and the NZ Dollar weakened a little on the news.

This morning's final revision of UK economic growth for Q4 was much better than expected. The Pound spiked in the immediate aftermath of the 3.0% annualised growth figure (up from a previous estimate of 2.7%) and this upbeat message will cause some gains in the value of the Pound in the hours ahead. I should imagine the Conservative Party will hope for a rise in the Polls as well. The GDP data followed a rise in UK consumer confidence, as announced overnight and good economic data arriving in the early days of an election campaign is inevitably a welcome sign for the incumbents.

Yesterday's Eurozone data included better than expected German inflation numbers and this morning's German retail sales figures have been just as buoyant. Clearly, one growing economy does not a Eurozone recovery make but any good news is welcome within the battered Eurozone. The Greek wrangling continues apace and no end is in sight just yet so the Euro can't rally on just this news but maybe just maybe things are starting to improve.

US personal income and expenditure data was surprisingly upbeat yesterday. That gave the equities markets a boost and assisted the already strong US Dollar. This afternoon brings a slew of US Federal Reserve speakers; most of whom seem to have differing views on the timing of the first US interest rate hike, so anything could happen.

This afternoon also brings Canadian economic growth data which may well be an improvement on the previous month's 2.8% annualised rate. If they are feeling competitive, they need to beat the UK's 3.0%.

Away from the markets, a couple who robbed as bank in Texas were caught by police after a 120MPH car chase but the police couldn't have wished for more damning evidence than the recent google searches on the female robber's phone. One was "how people got caught after bank robberies". At least there is another entry under that topic now.

Currency - GBP/Australian Dollar

A drop in the price of iron ore weakened the Australian Dollar and that was followed by speculation of an early interest rate cut overnight. That drop in the price of Australia's major commodity export product was driven by a slowdown in China; something we are familiar with, but the impact is much more broadly felt. I suspect the Sterling – Australian Dollar exchange rate would be higher were it not for conflicting signals from members of the Bank of England and for the impending UK General Election. These factors will weigh on the value of the Pound but there is still scope for another rally to A$2.00 against the pound within the current trading channel. That target remains worthy unless or until the Pound drops below A$1.88. That marks the bottom of the current trading range, so movement below there would be a game changer. ....or a direction changer, to be more precise.

Currency - GBP/Canadian Dollar

Sterling's woes at the hand of BOE members and in response to the upcoming election are having an impact on the Sterling – Canadian Dollar exchange rate. Nervousness over the potential for a very messy coalition is hampering the Pound but that is exacerbated in this instance by strength in the Canadian Dollar. The loonie (as the CAD is known) is gathering some strength through association with the US Dollar and through a little bounce in the value of Canada's oil exports. The GBP-CAD rate is trapped between C$1.93 at the top and C$1.82 at the bottom. A break of either r end of the range will change things significantly so beware. This morning's UK GDP data has caused a rebound but we await Canadian GDP data this afternoon and an upward revision is possible.

Currency - GBP/Euro

Having ventured forward to test 2007 levels the pound ran out of steam last week. The fall back in the Pound's value can be variously attributed to the onset of a general election, profit taking, the unsettling lack of agreement between members of the BOE's monetary policy committee et al. In essence, sterling had had a very health bout of strength and a period of consolidation or maybe reversal was inevitable. But ...the Pound found support around €1.35 and is above that level now. As long as nothing unforeseen befalls the Pound, we ought to see further gains on the weeks ahead and another rally to test €1.40 is not out of the question. This all changes though if €1.35 is breached because that would take this pair back into the trading channel it occupied from 2009 until last month.

Currency - GBP/New Zealand Dollar

The channel that has contained this pair for the last 2 years is pretty clear to see on the chart above. That shows that we currently have good buying interest in the Pound around NZ$1.94 and good interest in buying NZD at NZ$2.07. So now that we know that, it becomes quite straightforward to target your orders to take full advantage of this volatile pattern. It would be easy to see Sterling rallying quite hard if there were rumours of a decisive victory for any party in the general election but that seems unlikely.

Currency - GBP/US Dollar

The US Dollar is the currency du jour and that is very evident from the strength it is showing against the Pound and euro in particular. $1.46 support is holding at the moment so there is scope for another rally in the value of the Pound. However, with talk of early US interest rate hikes and a 6 week countdown to the UK election, there is plenty of scope for a dip in this pair to $1.44; levels not seen since 2010. Please also remember that the UK is on holiday for 4 days this weekend and that US employment data will be released in the midst of that. What I am saying is, if you have a requirement, there is a very strong argument to place an automated order into the markets to get the most out of the inevitable volatility.