News & analysis


Yesterday’s early European session saw the pound advancing to its highest level in over a week vs the US dollar as broad dollar weakness dominated markets after the Fed continued to reinforce a dovish message to markets on Wednesday evening. The pair stabilised during the latter part of yesterday’s session with little headlines around the UK dominating sterling. This morning’s economic data included an expansion in UK nationwide house prices from April, with the house price index rebounding strongly to 2.1% after March’s 0.3% month-on-month decline. Housing demand has been elevated over the past year, with the pandemic failing to throw a spanner in the works of homebuyers. Further ahead, an increase in new housing supply and a reassessment by households of their spending priorities in the post-pandemic stages may undermine demand later on this year. With no other data prints of note today and no central bank speakers scheduled, sterling is set to take cues from general risk sentiment and any moves in fixed income markets today.


The euro reached an over two-month high vs the US dollar yesterday morning after crossing through the early-March resistance level but still closed down on the day as the US dollar reversed earlier losses and Treasury yields rose. This morning, the pair continued to trade in the middle of yesterday’s range ahead of the eurozone GDP print releases. The French figure showed the French economy returned to growth in the first quarter of the year, with GDP growing by 0.4% in the three months through March. The decision by President Emmanuel Macron to put off tougher restrictions imposed by neighbouring countries has undoubtedly supported the French output, while Spanish GDP declined by 0.5% amid weak consumption and investment. Sentiment remains optimistic in the eurozone regardless with the EU expecting to receive another 1.8 billion vaccine doses from Pfizer and BioNTech through 2023, according to a diplomatic note seen by Bloomberg. Another memo showed the EU now expects to receive almost 29 million vaccines by next week, which would bring the total delivered to the bloc to 188 million. For the remainder of the day, markets are awaiting output figures from Germany and the eurozone at 09:00 and 10:00 BST along with eurozone unemployment figures at 10:00 BST. While Fridays are sometimes characterised by limited volatility in FX markets, significant economic data prints like today’s can still prompt movements in markets.


After a fairly mixed overnight session for the US dollar with safe-haven currencies losing ground on improved growth outlooks, the early European session saw modest USD buoyancy, causing both cable and EURUSD to take a leg lower. Data from yesterday showed the US economy accelerated by 1.6% over Q1 2021 – a robust 6.1% in annualised terms vs the consensus of 6.4%. The data illustrates the support by the public expenditures to stimulate growth as well as the swift vaccination rates in the US. Since last year, the US has unleashed extra public spending worth a quarter of its entire national economic output according to the IMF, compared to 10% in Germany, although the US also began the crisis with less generous social safety net programmes. With growth outlooks improving globally, the US dollar isn’t seeing any massive buying on the back of the data as markets by now have priced in the US growth and outperformance story. For the rest of the day, markets will watch general developments in risk sentiment in the absence of any economic data from the US.


The last week of April saw the Canadian dollar gain 1.70% against the US dollar as USDCAD dropped to levels last seen in early 2018. A combination of rising crude oil and commodity prices buoyed demand for the loonie this morning, with WTI rising 2% over the course of yesterday, while the currency also continues to find support in the Bank of Canada decision from earlier last week. Additionally, US President Joe Biden’s push for additional government spending bolstered investors’ expectations for a global economic recovery, further supporting the procyclical Canadian dollar. For today, all eyes are on Canada’s GDP figure from February which is set to print at 0.5% MoM. The Bank of Canada raised its forecasts for Canadian economic growth this year during last week’s meeting, making today’s GDP report even more significant as a guide.



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