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Euro stumbles on mixed ECB views

By Alex Hartley

Sterling opens under the big 1.3000 versus the US Dollar. The currency pair also traded under this rate for the most of yesterday. Early in Tuesdays session, UK public sector net borrowing showed a red figure decreasing £23.4 billion to 48.7 billion in the financial year ending March 2017, compared with the financial year ending March 2016. The release was overshadowed however by the terrorist attack in Manchester, which was already weighing on the Pound yesterday morning. Cable did break 1.3000 however, after the US released new home sales figures, as March’s strongest selling pace in a decade saw a stumble in April – 611k expected and 569k actually realised. GBP/EUR 1.2985 – 09:30am.

The first key release for the currency pair gets released at 7pm tonight. The US FOMC meeting minutes will bring the latest from the recent meetings between the FED members, offering an in-depth insight into the economic and financial conditions. Any indicators on interest rate hike influences will be anticipated.

Euro has lost a little ground against the Pound and US dollar. As mentioned in yesterday’s commentary, early data releases from Germany and Europe supported recent gains for the EUR with manufacturing, services and business climate data all posting good numbers. Benoit Coeure, arguably one of the most influential members of the ECB, however seems to be the reason EUR weakened Tuesday afternoon communicating thoughts on the ECB unwinding stimulus. Coeure warned that moving too slowly could eventually lead to a bigger shock, which is a contrasting view to Peter Praet who is an advocate for a cautious approach maintaining the easing bias. The different viewpoints have spooked markets as we edge closer to the June 8 policy meeting. GBP/EUR has broken 1.1600 and EUR/USD has fallen back below 1.1200. GBP/EUR 1.1598 – 09:30am.

The day ahead sees ECB President Draghi speaking at the first conference on financial stability in Madrid. Draghis words will be deciphered as to where he sits in the management of stimulus. Elsewhere, the FOMC meeting will also be eagerly anticipated.

After the UK public sector net borrowing yesterday, there was little in data to influence GBP/AUD. Sterling took a further fall against the Aussie on the release, but has since recovered breaking through 1.7400 overnight. This may have been helped by Australian construction work data coming in lower than expected as well as previous. GBP/AUD 1.7377 – 09:30am.

The Kiwi has also lost ground against the Pound. In the next 24 hours we will have seen the annual budget release from New Zealand which is the only key release for the location this week. Until then, the Kiwi has mimicked the Aussie in its losses against the Pound yesterday, into today. GBP/NZD 1.8502 – 09:30am.