Market Drivers for April 29 2014

UK GDP comes in bit weaker than forecast at 3.1%

EU Monetary supply expands at very weak 1.1% rate

Nikkei closed Europe 0.28%

Oil $101/bbl

Gold $1290/oz.

Europe and Asia:

EU Money Supply 1.1% vs. 1.4%

UK GDP 0.8% vs. 0.9%

North America:

Consumer Confidence 10:00 AM AM

UK GDP printed a bit lower than expected sending cable to retest the 1.6800 in what was otherwise a very quiet session of trade in the currency market as Japan was closed for holiday.

In UK the 1st quarter GDP printed at 0.8% versus 0.9% eyed rising at 3.1% annual pace rather than the consensus call of 3.2%. The gains were primarily in the service sector with hotels and catering expanding at 1.5% rate. However, agriculture, mining and electricity sectors all contracted possibly due to the tough weather conditions during the period.

Overall UK economy expanded at a very healthy 3.1% annual pace leading the G-7 universe in growth this year. However, the market was primed for a better number and cable sold off in the aftermath of the release testing bids at the 1.6800 level before finding some support. The slightly softer GDP news does take some pressure off BoE to hike rates sooner rather than later as the growth in the UK economy shows no signs of overheating.

Cable has so far failed at the 1.6850 level four times this year, but the pair remains well bid and could make another assault on that level over the next few days. Ultimately the BoE will be forced to raise rates and will likely become the first G-7 central bank to do so since the 2008 credit crisis which should help cable move higher towards the 1.7000 level as the quarter proceeds.

In Europe the calendar was very light offering mixed results into the EZ monetary conditions. EZ money supply expanded at a paltry 1.1% rate versus 1.4% eyed confirming that the region continues to battle deflationary pressures, but German CPI numbers showed a modicum of improvement as year of year levels increased to 1.7% rate. The data from Germany continues to suggest that price pressures remain very low, but may have bottomed out.

The euro initially dipped on the low money supply numbers but then recovered as markets continue to believe that the deflation threat in the region is not grave enough to force any policy action from the ECB.

With US calendar empty save for the Consumer confidence figures at 1400 GMT, this is the last day of the week that the event risk calendar remains quiet. Starting tomorrow the markets will get a plethora of data including FOMC meeting, and ADP preview of US employment report. USD/JPY has been acting well ahead of the data in anticipation of strong US numbers having cleared and held the 102.50 level and the pair could climb towards the 103.00 figure if the data throughout the week proves supportive.

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