Sterling Reaches Fresh Highs Ahead of UK GDP Data

• Aussie drifts higher but thrown off course after US home sales;
• Tensions eased between Ukraine and Russia causing Euro to strengthen against greenback;
• Sterling hit fresh highs ahead of GDP data this evening.

Throughout the Asian session yesterday, the Australian dollar was well supported and once again broke through 93 US cents. There seemed to be a higher appetite for risk throughout the Asian session as tension between Ukraine and Russia seemed to ease. Despite advancing throughout much of the morning, the tables soon turned as US data revealed increased appetite in housing demand causing the Aussie to retreat against its US counterpart for much of the evening sessions. Although data beat expectations, the dollar only moved marginally higher against the Japanese Yen as the market remains wary of the GDP report tomorrow and non-farm payrolls at the end of the week.

As tensions appeared to ease between Ukraine and Russia yesterday, increased risk appetite moved the Euro higher against the Greenback and Yen. As Mario Draghi addressed German lawmakers, he revealed that QE is not imminent and is not a likely scenario for the time being, therefore strengthening the Euro. The ECB President is still considering ‘unprecedented’ measures of monetary policy in an attempt to fight deflationary pressure, however recent comments indicate that his approach is measured and no rash decisions will be made.

This evening’s GDP data from the UK is expected to show that economic activity picked up pace in the first quarter of this year. Ahead of the data at 18:30 AEST, Sterling has advanced to fresh four-and-a-half year highs against the greenback to hit $1.6855, assisted by potential M&A activity between AstraZeneca and Pfizer. Sterling retraced throughout the US session as markets favoured the greenback after encouraging pending home sales data, this evenings economic release from the UK is likely to be the driving force of Sterling direction for the rest of the week.

Thomas William
Go Markets