17 Jun 2015

Dollar sold on less hawkish Yellen comments

United States Dollar: GBP/USD pushed higher again yesterday on the back of better than expected average earnings data from the UK. Wage growth accelerated by 2.7% vs. expectations for 2.5%. The unemployment rate printed at 5.5% as expected and MPC votes showed that Bank of England officials were unanimous in the decision to leave interest rates unchanged at their last meeting. GBP/USD broke higher through 1.57 on the positive earnings report and was well big bid throughout the remainder of the morning session. The FOMC statement was the next big event and it didn’t disappoint. The statement itself was fairly hawkish underlining that “activity has been expanding moderately after having changed little during the first quarter” and that “the pace of job gains picked up” as opposed to “moderated” in the last statement. Yellen was more dovish in her accompanying comments however and reaffirmed that any change in monetary policy would be dependent on data. The dollar was sold on the back of her less hawkish tone and GBP/USD went on to push through 1.58. It’s continuing higher this morning and trades at 1.5880 currently. Expect more volatility today too with the release of UK retail sales this morning and US inflation data this afternoon.

We expect a range today in the GBP/USD rate of 1.5850 to 1.6050

Euro: EUR/USD was steady for most of the European trading session yesterday as investors looked forward to the FOMC statement that evening. Yellen’s non-committal and less hawkish comments saw the US dollar fall across the board and EUR/USD gap from 1.1250 to 1.1310. As Asia reacted to Yellen’s comments EUR/USD maintained its momentum overnight and it opens this morning at 1.1395. It’s been refreshing to see investor focus turn to something other than Greece but the story will no doubt come back to the forefront of traders’ minds today and as the deadline gets ever closer.

We expect a range today in the GBP/EUR rate of 1.3900 to 1.4060

Aussie and Kiwi Dollars: The US dollar is broadly weaker this morning - AUD/USD is up to .7795 following Yellen’s statement yesterday. The NZD however has given up all of the post FOMC gains following the release of weaker than expected NZ GDP data which printed at 0.2% vs. 0.6% in the March 15 quarter. Various banks are already predicting another couple of rate cuts by the RBNZ and the kiwi has been smashed lower across the board as a result. GBP/NZD for example is much higher this morning and opens in London at 2.2925.

We expect a range today in the GBP/AUD rate of 2.0300 to 2.0600

We expect a range today in the GBP/NZD rate of 2.2850 to 2.3150

Data Releases

AUD: No data

EUR: Targeted LTRO, Eurogroup Meetings

GBP: Retail Sales m/m

NZD: No data

USD: CPI m/m, Unemployment Claims, Current Account, Philly Fed Manufacturing Index

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