Fed Decided to remain on hold, USD weakens

  1. The Fed decided to remain on hold yesterday keeping the 1.50%-1.75% interest level as was widely expected.
  2. The accompanying statement could be characterized as well balanced, with the most interesting comments relating to inflation.
  3. Overall, the Fed seems to be more confident about inflation rising, with some slight worries about the economy and a slight hint that it could tolerate inflation levels above target.
  4. Overall the USD weakened on the news however regained any losses quickly and the market seems to price in a possible rate hike in June.

UK Government in turbulence

  1. The UK government will have to face results of local elections today and albeit they are of local nature, they are considered as a poll of support for Theresa May.
  2. The local government elections are expected to show a rising support for her opponents especially in London.
  3. Should the results favour the labour party we could see pressure rising on PM May, regarding her customs union stance in a deeply divided conservative party.
  4. Should there further negative headlines about the UK political stage we could see the GBP weakening even further.

Today’s other economic highlights

  • UK: Markit/CIPS Services PMI for April, Survey: 53.3 Prior: 51.7, 08:30 (GMT), could strengthen GBP
  • Eurozone: Core CPI for April, Survey: +1.3% yoy Prior: +1.3% yoy, 09:00 (GMT), neutral for EUR
  • CPI for April, Survey: +1.2% yoy Prior: +1.3% yoy, 09:00 (GMT), could weaken the EUR
  • Canada: Trade Balance for March, Survey:-2.24B Prior: -2.69B, 12:30 (GMT), could support CAD
  • US: Unemployment Claims, Survey:225K Prior:209K, 12:30 (GMT), could weaken the USD
  • Trade Balance for March, Survey: -50.0B Prior: -57.6B, 12:30 (GMT), could strengthen the USD
  • ISM Non Manufacturing PMI for April, Survey: 58.1 Prior: 58.8, 14:00 (GMT), could weaken the USD
  • Speakers: ECB’s Constanzio and Couere speak.

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