The pound was the only major currency that outperformed against the dollar today, as it rallied from a European session low of 1.4795 to a high of 1.4920. The main catalyst for the move higher were comments from Bank of England Governor Mark Carney.
Speaking at a Bundesbank conference panel discussion, Carney reiterated that the next move in interest rates in the UK was to be higher not lower. His comments come after recent indications from the BoE Chief Economist Andy Haldane that a rate cut was possible due to a recent slowdown in the UK inflation rate. Meanwhile, the uncertainty around the upcoming national elections in May would likely limit any strong rallies in the pound until then.
The US dollar was initially stronger against the euro and the yen in the early part of the European session but soon reversed gains after US GDP data. The market reacted negatively to the lack of revision to the fourth quarter number, meaning the final reading of GDP showed the US economy grew at 2.2% in the final three months of 2014. There were expectations for an upward revision to 2.4%. The dollar accelerated losses versus the yen to 118.98 after failing to break above 119.50. The euro bounced back to a high of 1.0895 from a low of 1.0800.
An upbeat University of Michigan consumer sentiment report helped stop any further losses for the greenback. The index beat forecasts and came in at 93.0 for the final March reading. Consumer sentiment registered at 95.4 in February. Economists expected this month’s index to drop to 92.0.
Focus now turns to Federal Reserve Chair Janet Yellen’s speech. It is titled “The new normal for monetary policy” and commences at 3:45pm EST. It would be interesting to watch the speech for any insights into the US economy. Meanwhile, the main risk event for the greenback will be next week’s nonfarm payrolls report.
In other currencies, the Australian dollar traded lower in the European session, likely due to the low risk sentiment in the markets today. The aussie touched as low as 0.7774 and was capped at 0.7808.