18 Apr 2016

Dovish comments from Fed Member Dudley send USD lower

United States Dollar: GBP/USD has continued to gain overnight as comments from the president of the Federal Reserve bank of New York, William Dudley helped support US yields. Considered as part of the Fed’s ‘tight-three’ with Chair Janet Yellen and Vice-Chair Fischer, he said that monetary policy adjustments are likely to be ‘gradual and cautious’ as uncertainty remains, reiterating Yellen’s comments. He was however a little more hawkish on inflation expectation and remains confident the Fed’s target of 2% will be reached. Looking ahead to today, no data is due from the UK while the US posts their Housing Starts and Building permit numbers for March. Housing starts are expected to show an improvement to 1.188M from 1.178M the previous month and Building permits are due to increase to 1.2M vs 1.177M in Feb. Later on in the day Bank of England Governor Carney speaks and is likely to continue to highlight current economic conditions, i.e. Brexit. We open today with GBP/USD at 1.4315.

We expect a range today in the GBP/USD rate of 1.4275 to 1.4360.

Euro: GBP/EUR also experience an uptick as Sterling found itself in the unfamiliar position of being one of the strongest performing majors overnight. With no data from either the UK or Europe the moves are being attributed to knock on effect from the pounds gain against the dollar. Today no data is again due however the afternoon sees Bank of England Governor Carney deliver a speech while Eurozone Current account and Construction Output for Feb as well as ZEW Economic Sentiment and Current Situation for April are due. We open today with GBP/EUR at 1.2630. EUR/USD, broad dollar weakness saw the single currency galvanise support above the 1.13 level through yesterday and overnight. Starting the day hovering around that level the pair traded a fairly tight range before Fed Member Dudley’s comments sent Euro up to an intraday high of 1.1342. Some of the gains have been eaten away this morning as markets look towards Eurozone current account and construction output plus US housing starts / building permits for direction. We open today with EUR/USD at 1.1320.

We expect a range today in the GBP/EUR rate of 1.25 to 1.26

Aussie and Kiwi Dollars: The Australian Dollar gained steadily against its US counterpart following relatively positive minutes from the RBA. The Australian Central bank remains upbeat that the economy is performing well and implies it won’t be lowering rates anytime soon. They did however sight further increases in the current exchange rate level as a concern, especially without simultaneous rise in commodity prices. The NZD has also improved against the greenback and today sees the release of NZ Global Dairy Trade Price Index. While global commodity prices continue to remain low we are not expecting the diary price to increase much. We open today with GBP/AUD at 1.84 and GBP/NZD at 2.0410

We expect a range today in the GBP/AUD rate of 1.83 to 1.85

We expect a range today in the GBP/NZD rate of 2.0325 to 2.0525

Data Releases

AUD: RBA’s Governor Glenn Stevens Speech

EUR: Current Account (Feb), Construction output (MoM & YoY) (Feb), ZEW Survey – Economic Sentiment & Current Situation (Apr)

GBP: BOE Governor Carney Speech

NZD: GDT Price Index

USD: Housing Starts (MoM) (Mar), (Building Permits (MoM) (Mar)

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