Published: 28/04/2023 By ECAPThursday was a relatively quiet day for sterling with little to no significant data releases. This continues a quiet week where we have seen GBP trading in a relatively narrow range versus USD and EUR. The Lloyds business barometer index crept up higher than expected which provided some support to GBP in the expectation of a May interest rate hike. US equities had a strong day so most movements came from USD. Friday we can expect some position adjustment which could lead to some volatility ahead of the long weekend in the UK.
USD strength proved too much for the single market currency and it failed to make any significant headway in trading. A combination of inflation data and strong US equity markets hindered progress, with Thursday’s US data reaffirming bets of a rate hike. EUR will probably remain on the defensive on Friday as USD seems to be riding a small wave. Euro-zone industrial sentiment declined on Thursday, however, this was offset by better-than-expected numbers for the business and consumer survey as well as the services sector. Whilst yesterday saw EUR tick downwards ever so slightly, there is still solid support for the currency due to the widely held expectation that the ECB will hike rates again in the coming months.
In the US, GDP figures missed their mark and came in under consensus at an annualised rate of 1.1% (2.6% previously and forecasts of 2%). Having said this consumer spending was up 3.7% from 1% previously which provided some welcome news to the greenback. PCE prices index rose above expectations as well as a dip in housing investment and a decline in inventories for the quarter dampened the news, this was offset by the consumer spending numbers and the stronger-than-expected inflation reading only increasing speculation of a further Fed rate hike (85% chance according to the futures).