Another upside Eurozone data surprise yesterday may help the Euro hold on to its seven per cent year-to-date gain against the pound and current levels around €1.26-€1.27. Data released yesterday showed the German economy expanded by 0.7 per cent q/q between January and March 2016.

The data will increase confidence in the European Central Bank’s stimulus measures and their boost to the economy. Revisions to Q1 GDP data for the wider Eurozone were due yesterday and were expected to confirm a solid 0.6per cent q/q expansion.

Sterling

The Bank of England spent more time speaking about Brexit and almost avoided issuing any material forward guidance on interest rates. This meant ‘Super Thursday’ – the only major central bank announcement this month – gave traders little ammunition to cause any sharp Sterling moves. The BoE balanced its economic forecasts in its Quarterly Inflation Report, downgrading growth expectations for 2016 (2.2 per cent to two per cent) but upgrading slightly its inflation outlook with higher oil prices. The Pound was slightly weaker yesterday having failed again to get above the $1.45 threshold against the USD.

US dollar

The disconnect between the Fed and the market has widened again. Esther George, a voting member of the FOMC, warned that US interest rates are too low. These comments saw the USD’s trade-weighted index advance towards two-week highs before the US retail sales data yesterday.

Despite this, the USD fell last week after weak US labour market data saw market expectations of a June US interest rate hike fall to just three per cent. The disconnect between what traders believe and what the Fed is suggesting means there will be heightened uncertainty going into the Fed’s June 15 rate decision.