Sterling up on decent GDP data

Today's Highlights

• Sterling up on decent GDP data

• NZD weakened by worst trade gap since 2009

• US interest rate decision due later

• RBNZ should keep rates on hold tonight

FX Market Overview

​We heard overnight that New Zealand's trade deficit widened in March to the largest gap since 2009 as prices for lamb, beef and dairy products all hit fresh lows. All eyes are now on the Reserve Bank of New Zealand which has the potential to cut the relatively high base interest rate and reduce demand for the Kiwi Dollar. That would weaken it and that, in turn, would make exports more affordable to overseas buyers. Whether they will do that or not is an open debate but I tend to feel they will eschew the opportunity due to the domestic repercussions of lower interest rates. The NZ Dollar is weaker on the news, as you might expect but we only have to wait until later this evening to see if the RBNZ is rattled by the news.

I supposed, after seeing two major high street names fall by the wayside, we shouldn't be surprised by a slowdown in UK economic growth. The growth is still there though, according to the first estimate of Q1 growth data. 0.4% growth in the 1st three months of the year still means the UK is at an annualised 2.1% and that; believe it or not, is better than the forecasts and enviable at a time when so many other countries are still contracting or barely staying afloat. So it is perhaps not a surprise to see the Pound strengthen a little on the news. It has been doing that for a few days and this is partly a rebound of the recent falls, partly relief at the lessening of the Brexit likelihood and partly, I think, a realisation that blighty isn't in such bad shape after all when compared to other industrialised nations.

The rest of the morning will be quiet but this afternoon brings US trade balance and housing data as well as the Federal Reserve's interest rate decision. They are highly unlikely to move their base rate or alter their QE packages but the tone and mood of their statements will be very keenly watched for signs of further interest rate hikes. I suspect none are due for at least 6 months but the markets are pinning their hopes on earlier rises. The USD is twitchy and volatile ahead of the announcement and that presents opportunities for both buyers and sellers.

And Canadian authorities are a little red faces today. A student who came into Canada from Sudan claiming to be 16 years old is in custody after he applied for a visa to visit USA and his date of birth was discovered. He's 29 and at 6' 10" tall, is perhaps not so surprisingly, a very talented basketball player. I don't know about you but I don't know too many 29 year olds who could claim to be 16 and get away with it. I am quite envious.