King Dollar has appreciated against a basket of major currencies ahead of this afternoon’s estimate of first-quarter GDP growth. Seasonal factors are expected to see GDP growth cool in Q1, but this could have little impact on the Dollar’s mojo. With rising U.S. bond yields and expectations of higher U.S. interest rates heavily supporting the dollar, it is likely to hold its own against most majors.
The British pound's abrupt and aggressive depreciation following disappointing UK inflation data continues to highlight how sensitive the currency is to monetary policy speculation. The UK headline inflation rate unexpectedly dropped to 2.5% in March, which immediately raised doubts over the Bank of England raising interest rates next month. With UK wage growth rising faster than inflation, the squeeze on consumers is slowly coming to an end.
The British pound was unsettled and vulnerable on Thursday after reports showed that Britain remains the world’s slowest growing major economy. The Office for National Statistics confirmed that gross domestic product reached 0.4% in the final quarter of 2017, slowing from growth of 0.5% in Q3.
It has certainly been a chaotic trading week for the global equity markets amid fears of mounting inflationary pressures and higher interest rates. Asian shares suffered heavy losses during early trading on Friday following Wall Street’s steep declines overnight.