• Aussie dollar regains 94 cents after disappointing US GDP data;
• Broad greenback sell-off after disappointing durable goods and GDP data;
• Bank of England likened to ‘fickle lover’ as Carney continues to deliver mixed messages.
In a theme that has reoccurred for some time now, the Aussie dollar managed to regain losses seen earlier in the week after US housing data showed some promising signs. The positive home sales data was quickly forgotten about overnight as US data read worse than expected, which saw the Aussie dollar once again break back through 94 US cents, opening marginally lower this morning and testing support. With a lack of local economic data this week, direction has been sought from overseas and the Aussie continues to trade within a similar range. As disappointing US data has been digested, it looks as though the greenback has regained some traction and we could see the Aussie fall back below 94 cents this morning.
Overnight, it was announced that the US economy has shrank 2.9% in the first quarter vs expectations of a 1.8% contraction, in addition, durable goods data came in worse than forecast only to add salt to the wound. The final estimate of -2.9% confirms the worst first quarter seen since in the US since 2009, however, the data is historic and markets are forward looking. Of more interest to investors is data for the second quarter where a rebound is expected and recent data is highly unlikely to influence the Federal Reserve’s guidance on monetary policy.
With little data in the UK over the previous 24 hours, trade has generally been led by flow from overseas with the pound still hovering around US $1.70. Sterling bulls are somewhat confused at the moment by Mark Carney’s guidance on interest rates, one UK politician likening the Bank of England’s mixed messages to those of an ‘unreliable boyfriend’. Carney is due to deliver a speech this evening which is likely to stir up some attention ahead of key GDP data tomorrow which is expected to show that the UK economy expanded by 0.8% is the first quarter. In a speech where the focal topic will be the UK’s potentially inflated housing market, investors may struggle to digest the significance of his mixed guidance.
[B]Tom Williams
Sales Trader[/B]