Global equities rallied across the board amid strong corporate earnings in the US. In FX, the Bloomberg USD index gained after US Treasury Secretary Mnuchin said that Trump’s tweet on currency manipulation was a “warning shot” rather than a call for a weaker USD.
USDJPY has been rising during Asia’s trading session ahead of the press conference of US President Trump and Japan’s Prime Minister Abe this afternoon. GBP weakened slightly yesterday, but continues to trade around 1.4300, the strongest levels since the 2016 Brexit vote. Today’s focus is on UK inflation data at 9.30.
Our traders currently see GBPUSD support towards the 1.4275/70 area ahead of 1.4145. Resistance comes in at yesterday’s high of 1.4377 ahead of 1.4500. In EURGBP, support lies at 0.8620 and 0.8595 while short-term resistance is at 0.8670 ahead of 0.8700 and 0.8810.
The UK’s employment report was broadly in line with expectations, with the unemployment rate falling to 4.2% (versus 4.3% expected). Average Weekly Earnings printed 2.8% 3m/y, unchanged from the prior month, while core weekly earnings accelerated, supporting the case for a rate hike in May. The PBoC unexpectedly announced a 100bp cut in the reserve requirement ratio for banks, effective 25th April. It will allow some banks to repay MLF lending and release additional liquidity of about CNY1300bn (PBoC).
The Bank of Canada holds its meeting today and the market expects it to stay on hold. Barclays Research believes that “the bank remains data dependent but extremely cautious, as downside risks to the outlook remain: trade protectionism, slowing of the housing market, and the effect of previous interest rate hikes”.