Forex Market Review (Asian Session) – Sterling rallies ahead of UK GDP

Forex Market Review (Asian Session) - Sterling rallies ahead of UK GDP

The yen was better bid today as risk sentiment was the main driver despite a slew of data out of Japan during today’s Asian session.

Japan’s core CPI number remained well below the Bank of Japan’s 2% target and rose at a slower pace in March by 0.2% year-on-year versus expectations for a 0.3% increase. Household spending was weak as it fell much more than expected by 1.3% in March from a year earlier. Other data for March showed industrial production fell 2.1% last month while the unemployment rate held steady at 2.8%, indicating a tight labour market. But despite this, it has done little to lift inflation.

The dollar was little changed against the yen after a big tumble yesterday following soft US data. The pair consolidated around 111.20 yen but is up almost 2% for the week.

The dollar index, which tracks the greenback against a basket of major counterparts, gained slightly in Asia but is headed for a weekly loss.

The euro remained below the key $1.09 level after tumbling yesterday on ECB President Mario Draghi’s comments. The single currency fell after Draghi showed concern about subdued inflation in the Eurozone but he acknowledged solid growth in the economy. However, the euro is on track for a weekly gain after rising to a 5-1/2 month high this week following a rally on the results of the first round of the French elections last Sunday, which saw centrist and market favourite Emmanuel Macron winning.

Sterling held onto gains and mostly traded above the key $1.2900 level after a strong rally yesterday. Focus will be on UK GDP out later today. This will be the first reading for first quarter growth and forecasts are for a slower pace of 0.4% quarter-on-quarter growth in Q1 from 0.7% in the previous quarter.

Meanwhile, US GDP data will also be released today, which will be closely watched by the Federal Reserve. The Chicago PMI and University of Michigan consumer sentiment reports are also due.

Eurozone CPI will be published later in the day for the month of April. France already released preliminary CPI numbers, with the headline figure coming in at 1.2% year-on-year.

Source: Trade Forex with XM.

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