Talking Points:

British Pound Ma Rise if 1Q GDP Data Reboots 2015 BOE Rate Hike Hopes
Australian Dollar Gains with Yields Despite Lackluster Stevens Commentary
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First-quarter UK GDP figures headline the economic calendar in European trading hours. The year-on-year growth rate is expected to slow to 2.6 percent, marking the weakest print since the fourth quarter of 2013. While UK economic data has underperformed relative to consensus forecasts since the beginning of the year, leading survey data points to accelerating manufacturing- and service-sector activity growth through March. If this proves to foreshadow an upbeat GDP print, the British Pound is likely to rise as traders reconsider the possibility of a 2015 BOE interest rate hike. As it stands, futures markets price in the onset of policy tightening in the first quarter of 2016. We remain short EURGBP.

The Australian Dollar outperformed in otherwise quiet overnight trade. The move tracked a pickup in Australian bond yields, pointing to firming monetary policy bets as the likely driver behind price action. Curiously, the move played out as RBA Governor Glenn Stevens explicitly declined to comment on rate-setting matters ahead of next week’s meeting, offering no apparent lead for investors to follow. The markets see a 51 percent probability of a 25 basis point reduction, according to priced-in expectations reflected in OIS rates.

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