Overview
The USD has once again dominated proceedings in FX moves, with US participants coming to market to drag the USD-index into positive territory during the European afternoon. The greenback was bolstered by hawkish comments from Fed's Lockhart suggesting that June, July and September are all possible timings for the first rate hike and the Fed can begin to move out of loose monetary policy measures and into the normalisation of interest rates. Positive sentiment was further supported by the highest US Services PMI reading since September (58.6 vs. Exp. 57.0, Prev. 57.1), while the weekly jobless report was not too far from market consensus (US Initial Jobless Claims (Mar 21) W/W 282K vs. Exp. 290K (Prev. 291K), US Continuing Claims (Mar 14) W/W 2416K vs. Exp. 2400K (Prev. 2417K, Rev. 2422K)).
USD strength weighed on major pairs, with GBP/USD continuing the recent downward trend despite better than expected UK Retail Sales (Ex Auto M/M 0.7% vs Exp. 0.4%, Prev. -0.7%, Rev. -0.3%) and comments overnight from BoE’s Miles suggesting that the next rate move from the BoE will be a hike. The better than expected retail sales saw initial strength in GBP, however, GBP/USD ended the session around 180 pips off the day’s high with downside momentum seen on the break of Wednesday’s low of 1.4831. Elsewhere EUR/USD resides firmly below the psychologically significant 1.1000 handle, with traders inclined to reduce risk profile as quarter end approaches. Meanwhile, commodity currencies have generally traded in line with WTI and Brent crude futures today, strengthening during the European morning on the back of Saudi Arabia entering the conflict in Yemen, before paring some of these gains at the latter end of the session.
Looking ahead, tomorrow may see focus fall onto GBP during the European morning, with BoE’s Haldane (Soft Dove), Carney (Neutral) and Broadbent (Neutral) scheduled to speak at separate events. The US is then back in focus with Fed’s Fischer (Voter, Soft Dove) and Yellen (Dove) also scheduled to speak, as well as the tertiary release of Q4 US GDP Annualized and the final reading of March University of Michigan Sentiment.