GBP Drops on DIsappointing PMI
Sterling loses across the board on weaker than expected UK April PMI,
RBA Rate Hold Supports AUD, while CAD boosted by Elections
UK April PMI drops to 54.6 below expectations of 56.9 from a previous 57.1, reinforcing the belief that the Bank of England could keep rates unchanged at this weeks MPC meeting. GBP drops against the euro and the dollar with the break above 0.8940 increasing the likelihood of a test of 0.9050. While the 1.6430 level holds on cable then we could still expect to see further strength towards the recent highs.
The mornings decision by the Reserve Bank of Australia to keep interest rates unchanged, while a little surprising given last weeks higher than expected CPI figures, still serves to highlight these inflationary pressures, as the bank acknowledged that the high level of the dollar wouldnt in of itself be enough to keep inflation in check. However concern about continued spill over effects of the Queensland floods may well have stayed the banks hand on this occasion. AUDUSD needs to break above the 1.1000 area and yesterdays highs to push on and make further gains.
The US dollar continues to remain under pressure against a basket of currencies, despite yesterdays Bin Laden bounce. The greenback looks set to test levels last seen in July 2008 around 71.30.
Last weeks FOMC meeting and press conference, merely confirmed that despite higher inflation expectations around the world, the US Federal Reserve will continue to keep monetary policy loose, especially in light of a weaker then expected Q1 GDP number. This stance contrasts with other central banks tightening policy in the face of rising price pressures. It seems that improving economic data continues to take a back seat to the Feds ultra loose fiscal policy.
The win by Canadas conservatives in the Canadian election has sent the Canadian dollar back towards the highs of this year at 0.9445, however it still remains someway short of the 2007 highs at 0.9060.
Euro continues to be buoyed by higher rate expectations especially in light of last weeks higher than expected April CPI estimate which came in at 2.8%. The 2009 highs at 1.5145 remain in focus while above 1.4770, but concern is mounting about the high level of the single currency as the peripheral economies struggle.
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