Pound Looks to 1Q GDP Data to Guide BOE Policy Outlook

The British Pound may fall if first-quarter GDP figures fall short of expectations, boosting expectations for an expansion of BOE monetary stimulus efforts.

Talking Points

British Pound May Fall on BOE Easing Bets if GDP Data Disappoints
Japanese Yen Finds Support Despite Risk-On Mood in Asian Session

The preliminary set of first-quarter UK GDP figures headlines the economic calendar in European hours. Expectations suggest output expanded 0.1 percent, narrowly avoiding a triple-dip recession. Data from Citigroup suggests news-flow has tended to underperform relative to expectations over recent months however, opening the door for a downside surprise. Such an outcome is likely to weigh on the British Pound as traders build out expectations for an expansion of BOE stimulus effort.

The US Dollar faced broad-based selling pressure in overnight trade, down as much as 0.3 percent against its top counterparts, as a pickup in risk appetite put downward pressure on the go-to safe haven currency. The MSCI Asia Pacific regional benchmark equity index added 0.8 percent. The likewise safety-linked Japanese Yen managed to find support however. While a readily apparent catalyst for the divergence is unclear, the Yen may have enjoyed vaguely supportive comments from Finance Minister Taro Aso and BOJ Governor Hirohiko Kuroda, both of whom talked down intentions to weaken the currency.

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