The single currency taking a bit of a beating early on, which has seen nearly one big figure taken off EURUSD. ECB Governing Council member Coeure has said that the ECB is to front-load QE purchases in May and June ahead of the summer break and this has pushed down bond yields (and hence the euro) as a result.
The RBA minutes were marginally dovish, inasmuch as the discussion referenced the potential for further easing should conditions warrant. Recall that the forward guidance was removed from the statement when rates were cut to 2% on 5th May. The Aussie was initially weaker on the news, but quickly managed to recover back above the 0.80 level towards the end of the Asia session. The other standout in overnight trade was the kiwi, which pushed above the 0.74 level on the back of the latest data on inflation expectations, the firmer tone to which dampened hopes for an easing in rates at next month’s meeting.
The early focus for today will be with sterling, with inflation data released at 08:30 GMT. Recall that the headline rate was flat in last month’s released, with the same expected for today’s release for April. The core rate, at 1.0%, is worth watching. This has fallen from 1.4% to 1.0% over the space of 2 months. Further falls here will accentuate the perception that the low headline rate is spreading elsewhere in the economy.
The pound has been holding up well in recent sessions against the modest dollar recovery, but it’s this core rate where the fate of the pound lies in terms of today’s reaction. A push below the 1.0% level would serve to threaten the relatively better tone seen of late.