28 Apr 2015
Aussie bulls in control, UK GDP Q1 in focus
FXStreet (Bali) - The Australian Dollar was the main winner in Asia, with an uneventful speech at the Australian Financial Review Banking & Wealth Summit in Sydney, saying not comments on monetary policy would be given ahead of the May 5th rate decision, providing the trigger traders needed to extend the upward momentum, by simply knowing that there would be no risk headlines today.
The Japanese Yen exchanged hands just above 119.00, with lower lows still being printed despite Monday's downgrade of Japanese credit rating by Fitch. David Song, Analyst at DailyFX, notes that "the series of lower highs & lows in USD/JPY may produce a further decline in the exchange rate amid bets for a further expansion in the BoJ’s QQE program." The Japanese Nikkei 225 traded positive by 0.4%.
The New Zealand Dollar had a slow but steady correction lower, sliding from 0.7665/70 down to 0.7620/25. Position squaring is the name of the game in this market ahead of key risk events later this week (FOMC and RBNZ.) With regards to the NZ Central Bank meeting, Charles St Arnaud, Economist at Nomura, believes "the RBNZ may modify its statement slightly", adding that "while we believe the RBNZ will continue to signal that it does not intend to change its policy rate in the near future, we think it will likely suggest that monetary policy may need to be kept accommodative for longer."
Main headlines
RBA Stevens: No comments on monetary policy ahead of May 5th meeting
Australia's Treasurer: AAA rating at risk if budget not returned to surplus
Japan Retail Trade (YoY) below expectations (-7.3%) in March: Actual (-9.7%)
Heading into Europe
During the next European session, the focus is going to be the UK provisional Q1 GDP. Brian Daingerfield, FX Trading Strategist at RBS, notes: "Our economists expect first quarter UK GDP growth to rise 0.5% q/q and acknowledge a dilemma between the stronger business surveys and weaker official output data."
"We remain bearish on GBP/USD medium-term, and we believe that the risks of a slowdown in investment intentions in an uncertain political environment may be underpriced. Still, without a clear slowdown in survey data and a more clearly dovish MPC, it may be difficult for downside risks emanating from near-term political risks or a persistent current account deficit to manifest for GBP", Daingerfield added.
Samuel Tombs, Economist at Capital Economics, expects the first estimate of UK GDP to show that the recovery slowed in Q1 "and may therefore put the coalition parties on the back foot just nine days before the general election. Granted, the business surveys have been upbeat," Tombs said.
Tombs adds: "We forecast a slowdown in quarterly GDP growth from 0.6% in Q4 to 0.4% in Q1 – but there is a risk of an even weaker number. Nonetheless, we continue to think that GDP could grow by about 3% in 2015. Households’ incomes are on track for their strongest growth since 2006 this year. Meanwhile, borrowing costs are falling and monetary stimulus appears to have revived the euro-zone economy."
GBP/USD technicals
GBP/USD has been solidly bid in the last 2 weeks, re-aligning its valuation with its UK/US yield differentials, with the rate currently at 1.5235/40, near Monday's highs. Jim Langlands, Founder at FXCharts, notes that the pair "has taken out several important resistance levels by making a sustained break above the long term channel, the Fibo level (23.6% of 1.7191/1.4565) at 1.5180 and also above the 100 DMA (1.5195)." Jim expects that "by closing above these levels the way now appears open for a move to higher ground, which could be seen later today if the Q1 GDP figure comes in above expectations."
Jim adds: "If we do move higher, the levels to watch, above the 1.5260 session high, are at 1.5269 (5 March high) and then at 1.5315 (76.4% of 1.5551/1.4565). The downside will now find bids at 1.5190/1.5200 and then at 1.5165 (minor), below which would head back to the session low at 1.5106."
The Japanese Yen exchanged hands just above 119.00, with lower lows still being printed despite Monday's downgrade of Japanese credit rating by Fitch. David Song, Analyst at DailyFX, notes that "the series of lower highs & lows in USD/JPY may produce a further decline in the exchange rate amid bets for a further expansion in the BoJ’s QQE program." The Japanese Nikkei 225 traded positive by 0.4%.
The New Zealand Dollar had a slow but steady correction lower, sliding from 0.7665/70 down to 0.7620/25. Position squaring is the name of the game in this market ahead of key risk events later this week (FOMC and RBNZ.) With regards to the NZ Central Bank meeting, Charles St Arnaud, Economist at Nomura, believes "the RBNZ may modify its statement slightly", adding that "while we believe the RBNZ will continue to signal that it does not intend to change its policy rate in the near future, we think it will likely suggest that monetary policy may need to be kept accommodative for longer."
Main headlines
RBA Stevens: No comments on monetary policy ahead of May 5th meeting
Australia's Treasurer: AAA rating at risk if budget not returned to surplus
Japan Retail Trade (YoY) below expectations (-7.3%) in March: Actual (-9.7%)
Heading into Europe
During the next European session, the focus is going to be the UK provisional Q1 GDP. Brian Daingerfield, FX Trading Strategist at RBS, notes: "Our economists expect first quarter UK GDP growth to rise 0.5% q/q and acknowledge a dilemma between the stronger business surveys and weaker official output data."
"We remain bearish on GBP/USD medium-term, and we believe that the risks of a slowdown in investment intentions in an uncertain political environment may be underpriced. Still, without a clear slowdown in survey data and a more clearly dovish MPC, it may be difficult for downside risks emanating from near-term political risks or a persistent current account deficit to manifest for GBP", Daingerfield added.
Samuel Tombs, Economist at Capital Economics, expects the first estimate of UK GDP to show that the recovery slowed in Q1 "and may therefore put the coalition parties on the back foot just nine days before the general election. Granted, the business surveys have been upbeat," Tombs said.
Tombs adds: "We forecast a slowdown in quarterly GDP growth from 0.6% in Q4 to 0.4% in Q1 – but there is a risk of an even weaker number. Nonetheless, we continue to think that GDP could grow by about 3% in 2015. Households’ incomes are on track for their strongest growth since 2006 this year. Meanwhile, borrowing costs are falling and monetary stimulus appears to have revived the euro-zone economy."
GBP/USD technicals
GBP/USD has been solidly bid in the last 2 weeks, re-aligning its valuation with its UK/US yield differentials, with the rate currently at 1.5235/40, near Monday's highs. Jim Langlands, Founder at FXCharts, notes that the pair "has taken out several important resistance levels by making a sustained break above the long term channel, the Fibo level (23.6% of 1.7191/1.4565) at 1.5180 and also above the 100 DMA (1.5195)." Jim expects that "by closing above these levels the way now appears open for a move to higher ground, which could be seen later today if the Q1 GDP figure comes in above expectations."
Jim adds: "If we do move higher, the levels to watch, above the 1.5260 session high, are at 1.5269 (5 March high) and then at 1.5315 (76.4% of 1.5551/1.4565). The downside will now find bids at 1.5190/1.5200 and then at 1.5165 (minor), below which would head back to the session low at 1.5106."