0430 UK GDP q/q prelim (+0.5% expected,-0.5% prior, +0.3% to +0.8% range)
Affliated Reports:
UK GDP y/y final (1.8% expected, 1.5% prior, 1.5% to 2.0% range)
UK Index of Services (-0.3% exp, -0.5% prior, -0.4 to -0.3 range)
The market has been waiting for this report for sometime, to see if there is
any improvement from Q4 2010 figures which were reported in Jan, Feb & March.
With inflation so high in the UK, higher rates are needed to tame it, but with
such bad growth figures as last quarter, the BOE has to be very careful about
hiking rates too soon, otherwise the 'green shoots' will be die. Various other
figures have come out in the meanwhile such as PMI figures which have shown
things picking up, but others, such as yesterday's CBI Industrial Trends have
come out worse. Today's GDP figure is the preliminary or flash estimate for
Q1 2011, it is the 1st of 3, the revised and final due in the next 2 months.
The 1st estimate for last quarter came out in January and was a full -1.0
below expectations of +0.5, a massive deviation and GBPUSD sold off 150 pips
in just over an hour, until high CPI numbers brought back some bids. The low
reading was written off as being due to bad weather, which affected the uk more
than other countries because the climate is usually mild and the infrastructure
is not sufficiently prepared for so much snow. Today the number is again expected
at +0.5, there have been some indications from Chancellor Osbourne and BOE's Weale
that today's number will be weak again. With yesterday's poor CBI Ind Trends the
Pound has been a notable exception to the other pairs gains against the USD, all
of which have been making new highs. We will use 0.2 deviation as this historically
has worked well, even a flat reading maybe enough for the bulls. If anything the
lower trigger could be considered for stretching out to -0.3 if traders wish to be
more conservative, this is due to the rumors about a weak number previously mentioned.
It it comes out at +0.7% or higher, GBP/USD should rally 40 pips.
If it comes out at +0.3% or lower, GBP/USD should drop 40 pips.
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1700 NZD Interest Rate Decision (2.5% expected, 2.5% prior, 2.5% unanimous)
All 17 analysts surveyed by Bloomberg expect the RBNZ to hold rates low at 2.5%.
Last month the Bank reduced interest rates by 0.5% which was more than the 0.25%
cut expected by most of the market. The RBNZ did cut rates due to the earthquake
on Feb 22nd, which has slowed growth. Inflation is also very low which give the
Bank room to cut. Consumer and Business confidence is low, despite all this the
New Zealand dollar has continued to soar higher. There is usually a statement
that comes out with the rate figure. Currently the next rate increase is predicted
for December, that is sometime off. Any indication in the statement to move this
predicted date sooner will cause the kiwi dollar to appreciate, any language
emphasizing the slow in growth due to the quake or other factors could see the
NZD ease. The Fed did little today and again the USD has been offered quite
strongly since the FOMC statement and press conference ended, be aware of this
if trading the NZDUSD.
-If they unexpectedly hike rates, NZD/USD should rally 50-80 pips.
-If they unexpectedly cut rates, NZD/USD should drop 50-80 pips.
-If the statement indicates rates being hiked sooner, NZD/USD should rally 30-50 pips
-If the statement highlights continued or worsening weak economic growth, NZD/USD should drop 30-50 pips
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