Daily Market Report 22/04/2013

Despite the lack of economical data, trading was very volatile for sterling on Friday, with the currency starting up against its peers in the morning to then finish lower by the end of the day.

Sterling gained in the morning after incoming Bank of England Governor Mark Carney failed to signal that the BoE will expand its stimulus measures – a practice that would typically devalue a currency. The market had been anticipating Carney to mention something on the stimulus front and because he didn’t, investors took this as a cue to drive the pound higher.

However as the afternoon progressed, sterling traded lower and after European markets closed, rating agency Fitch cut the UK’s credit rating to AA+ from AAA citing the country’s deteriorating economic climate. This added to the poor week for the pound, where we had the IMF weaken its growth outlook for the UK and data showed that unemployment rose to 7.9%. The pound generally finished lower on the week against the majority of its counterparts.

The only notable data to report from Friday was from Canada where the rate of inflation missed expectations to fall to 1%.

The yen continued to weaken after the G20 declined to oppose the monetary stimulus policies that the Bank of Japan (BoJ) had recently put in place. BoJ Governor, Haruhiko Kuroda, took relief from this and commented that it will allow him to confidently continue quantitative easing for the next two years. The news buoyed equity markets with the Nikkei rising 1.9% as well as increasing demand for higher yielding currencies such as the Australian, New Zealand and Canadian dollar.

The big risk event this week will be the release of 1st quarter UK GDP figures on Thursday, where we will find out if the UK is in fact in another recession or not. Following the poor performance for the pound last week and given the relatively negative sentiment on the currency at the moment, expect the pound to remain under pressure to trade lower leading up to the data on Thursday.

Today, the morning is void of any major economic data to note of but we do have consumer confidence figures from the euro zone as well as existing home sales figures from the US in the afternoon.

Key Announcements:

15.00pm – EUR – Consumer Confidence (Apr): Expected to fall further to -23.85.

15.00pm – USD – Existing Home Sales (Mar): Expected to fall to 0.6%.