Sterling steady after Queen’s (or Prince’s) speech

For the first time in 49 years, the Queen’s Speech at the State Opening of Parliament wasn’t actually delivered by the Queen. Her place was taken by her son, Prince Charles but the content was still laid out by the government. From an economic standpoint, there wasn’t anything controversial enough to shift the dial on Sterling’s value. Hence the GBP traded in a relatively narrow range on all fronts but held onto the gains it made earlier in the week. There is a notable lack of data from the UK today. So, it wouldn’t be a surprise if the GBPUSD rate stayed around the current $1.2325 and the GBPEUR rate trod water near this morning’s €1.1700.

US inflation data is key for USD today

Having lost a little ground earlier in the week, The US dollar is fairly static ahead of this afternoon’s US inflation data. The general consensus is that the consumer price index will remain above 8% but the core CPI, which excludes some of the more volatile elements, will have eased to around 6%. The big question is whether this will have any impact on the Federal Reserve’s plans for US interest rates. There have been several suggestions from FOMC members that larger interest rate hikes are still a possibility and the US President has confirmed the Fed’s focus on taming inflation. At this stage that hasn’t strengthened the US dollar any further. The EURUSD rate is in a tight range of around $1.0550.

Christine Lagarde speech awaited

We will get a speech from the president of the European Central Bank, Christine Lagarde this morning and Euro traders are largely inactive ahead of that event. As is always the case, all we really want to know is whether the European Central Bank is going to start raising its base rate when that will happen, and the expected pace of interest rate hikes. It is almost inconceivable that Christine Lagarde will give us all that information in one speech but hints, tips, and clues will be seized upon by Euro traders. We will have a number of speakers from the ECB today, so there is always scope for further information before the day is over.

Aussie consumer confidence slumps

The Chinese consumer price index came in at 2.1% for the year to April. That was above expectations and it would normally have strengthened the currencies of the countries that supply China with raw materials. Australia is one of those countries but the Aussie dollar failed to gain after the Westpac consumer confidence index fell well below expectations at minus 5.6%. That’s the sixth negative reading in a row and is the worst outcome since August 2020. The Reserve Bank of Australia will heed that as they contemplate further interest rate hikes. Interest rate hikes are a very blunt instrument and, arguably, not very effective when the inflation you are seeking to control is not driven by overexuberant consumers but by external events. The GBPAUD rate is fairly static at AUD 1.7700 or thereabouts.

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