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Market Brief
The UK has released some Tier 1 data this morning before the London open, which the pound found encouraging. UK GDP Preliminary reading Quarter on Quarter for Q1 2021 came in at -1.5% which is above the market’s consensus of -1.6%. Year on Year data came in as expected. The GDP estimate for March came in at 2.1% versus the expected 1.3%. The UK’s manufacturing sector shows output up 2.1% month on month for March 2021, beating analysts’ expectations. The quarterly data indicates the impact of restrictions, with the fall in international trade reflecting the initial effects of the Brexit trade deal. Generally, the data was reflecting the current state of affairs and the outlook is for this contraction to become an expansion in the near-term future. Though trade balances affected by Brexit may still take a while to resolve.
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The GBPUSD bounced 20 pips on the news after testing towards yesterday’s lows in the Asia-Pac session. 1.4250 is a significant target to the upside for the pound and would mark the start of a new bullish range.
The ActivTrader sentiment indicator shows that 75% of traders using the platform feel that the pound is trading too high currently.
Yesterday the US Treasury yields traded higher to 1.625%, as concerns about inflation surpassed moves into a traditional ‘safe haven’ asset. The biggest fallers were in the risk-sensitive equities markets and commodities. Asian markets fell sharply for the second day in a row, though the Australian government is following the US, Chinese and now the UK, and announced a budget that is going to focus on spending on infrastructure.
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The Nikkei 225 was down -1.5% after Japanese companies reported bad earnings data, this marks the worst lowest levels in the Nikkei for 14 weeks.
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The AUDUSD is down today by 0.36% after forming a swing high structure this last few days.
India’s COVID-19 statistics hit a new record high, in the past 24 hours, there were 4,205 coronavirus-related deaths, bringing the total number of coronavirus cases in India to 23,340,938. The hope for India is in the data showing recoveries from the virus now stands at 19,382,642, and more than 175 million doses of the coronavirus vaccine were administered in the country.
The US CPI report is the main focus for all the markets today, with analysts expecting the headline figure for April to show annual inflation rising to 3.7% from 2.6% in March. Inflation is set to rise further in May, due to concerns around ongoing rises in energy and other commodity prices and worries about disruptions with supply chains.
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The US dollar has found resistance at the previous market structure from the April 29th low and is trading back inside this week’s trading range. During 2021, if the US yields were steepening this had been bullish for the US dollar, so a disappointment in CPI reading today, could see the US treasury yields fall off from their recent highs and with that, the US dollar could get dragged down too. $90 is still the significant level for the US dollar bulls to defend.
