rahul.khanna's picture

Economic outlook for major currencies

USD retail sales came in well below expectation hurting the dollar bulls. We expect the current correction to continue, with US Inflation data on Friday key to any directional hints.

GBP dipped post headline inflation (March) at zero (CPI), and we expect GBP to remain weak heading into 7th May UK election. However, the unemployment rate for February is due in on Friday and any significant drop in the figure may trigger a bounce.  Overall the fundamentals remain relatively strong, but the outcome of the general election holds key.

EUR has consolidated over the past month due to a stream of positive economic data from the Euro-zone; Business numbers like PMI & industrial production continue to beat estimates thanks to a very weak EUR and the ECB QE program. Only disturbance is Greece which the market is giving as little attention as required, this is unlikely to affect EUR as market participants see little contagion risk. However, things can escalate and it would be prudent to keep an eye on Grexit.

AUD was relatively weak post China trade concerns but has since stabilised due to a positive NAB business confidence survey. Key data out overnight on Wednesday (0200 GMT) will be China GDP growth rate (Q1), any figure below estimate is likely to trigger a deeper dip in AUD with focus turning to employment change (MAR) on Thursday.