Key Points
• Lower volatility keeps trading rangebound
• EU growth to keep rate hikes intact?
• Last US inflation number ahead of Fed
Recap
US data was mixed yesterday with growth in the first quarter slowing more than expected to 1.1%, down from 2.6% in the last quarter of 2022. The GDP price index and first-quarter core PCE came in higher than expected, signalling the Fed will have to raise interest rates in May, and eased back rate cut expectations by the Fed towards the end of the year. Initially USD gained off the news, but as we have seen this week, a lack of conviction saw no continuation of the move with USD gains easing towards the end of the day. Goldman Sachs commented yesterday as well, stating that they seek peak interest rates in the UK between 4.75% – 5.00%, matching the current market expectations based on the economy performing better than expected.
Markets
A lack of conviction and range trading seems to be the theme now with no clear direction on GBPUSD, EURUSD and GBPEUR. Sentiment on GBP continues to improve with the economy continuing to perform better than what was expected at the start of the year. EUR continues to be favoured by markets due to interest rate expectations continuing to be elevated. Today’s GDP and inflation numbers could continue to support this notion and the EUR. Yesterday’s first-quarter core PCE numbers from the US came in higher than expected, suggesting that today’s figure for March will come in higher as well, possibly cementing a 0.25% hike by the Fed next month. However, we wouldn’t expect any monumental moves on USD pairs unless there was a big deviation from the expected number. USD continues to be susceptible to weakness given expectations for the Fed to cut rates later this year. There needs to be a significant shift higher on the latter end of interest rate expectations to cause any significant strength in USD. Canadian GDP is also out today, and a higher-than-expected print could see markets price up the chances of rate hikes from the BoC.
Volatility in the markets has simmered somewhat since the banking crisis in March, as can be seen looking at the VIX index which measures stock market expectations of volatility. So it’s not been too surprising to see FX market volatility lower as well, which has resulted in range trading – particularly on the major FX pairs such as GBPUSD, EURUSD.
Equals Market Analysis– 28th April 2023
Today’s Market Rates
Today’s Interbank Rates at 09:17 am against GBP movement.
GBP>EUR – 1.1347
GBP>USD – 1.2460
EUR>USD – 1.0982
GBP>CAD – 1.7014
GBP>AUD – 1.8927
GBP>SEK – 12.825
GBP>AED – 4.5742
GBP>HKD – 9.7830
GBP>ZAR – 22.938
GBP>CHF – 1.1170
Today’s Highlights
· EUR Gross Domestic Product (QoQ)(Q1) PREL
· CHF SNB’s Chairman Jordan speech
· EUR Gross Domestic Product s.a. (QoQ)(Q1) PREL
· EUR Gross Domestic Product s.a. (YoY)(Q1) PREL
· EUR Harmonized Index of Consumer Prices (YoY)(Apr) PREL
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