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GBP EUR, GBP USD Flat as Markets Await Direction Following Article 50 Trigger

The Pound was rudderless against the Euro and US Dollar yesterday as domestic data gave investors little direction.

Both GBP EUR and GBP USD pairings ended the session around opening levels, with traders unimpressed by the day’s UK data.

Released at midnight, the GfK consumer confidence survey unexpectedly held steady at -6 instead of weakening to -7 as economists had predicted, but the business barometer from Lloyds weakened from 40 to 35.

This continued to highlight the difference between how consumers and businesses feel as Brexit approaches, although next month’s indices may prove more enlightening given that both consumer and private sector questionnaires will register the impact of Article 50 triggering.

The rest of the day’s data was disappointing, with house prices declining -0.3% in March; the first time they have done so since the middle of 2015.

Finalised GDP figures for the fourth quarter of 2016 clocked in at the expected 0.7% on the quarter, but year-on-year figures were revised down from 2% to 1.9%.

The index of services for January offered more cause for concern, contracting -0.1% against forecasts on the month and slowing further-than-expected to 0.6%.

The Euro was unable to capitalise on disappointing data, despite Eurozone ecostats proving more supportive.

German labour market data showed 30,000 fewer people were unemployed in March – nearly twice what had been forecast – and this resulted in the unemployment rate clocking in at a record low of 5.8%.

Eurozone inflation data actually performed worse-than-expected, but after Germany’s CPI had already fallen short of predictions on Thursday investors were already prepared for this.

As a result, headline Eurozone inflation slowing from 2% to 1.5% – rather than to 1.8% -and core inflation weakening from 0.9% to 0.7% instead of 0.8% didn’t weigh as heavily upon the common currency as might have been expected.

The US Dollar was similarly unable to capitalise on the indifferent Pound, with investors wanting more direction on fiscal and monetary policy before adjusting or taking up positions on the ‘Greenback’.

Until there are stronger indications that President Donald Trump either will or will not be able to enact his spending and tax plans, or clues regarding how many times the Federal Reserve will hike rates again – if at all – this year, investors are unsure how to trade the US Dollar.

Wednesday’s release of the Federal Open Market Committee (FOMC) meeting minutes could set the ‘Greenback’ on a more solid trajectory if they take the same dovish tone as Janet Yellen following the announcement of the policy decisions, or show far more support for additional hikes than traders inferred following March’s interest rate decision.