Fed remains noncommittal as growth stalls in the US

Enrique Díaz-Álvarez30/Apr/2015Currency Updates


Sterling appreciated versus the Dollar yesterday by 0.5% despite limited data in the UK.

Average house prices in the UK rose by 1% in April, marking its largest monthly increase in almost a year according to Nationwide. Prices rose despite a slowdown in activity, which may have been caused by the uncertainty around the result of the upcoming election. As a result, annual house price growth increased for the first time in seven months, rising to 5.2%, from 5.1% last month.

Elsewhere, British consumer confidence fell this month for the first time in four months according to polling firm YouGov and economics consultancy CEBR. The index declined from 113.9 in March to just 113.1 in April as Britain suffers in the midst of a cost-of-living crisis. This was more than a point lower than this time last year and will provide another disappointment for David Cameron with now just a week until polling day.

The General Election remains in the forefront, with the televised Q&A’s taking place on Thursday. An otherwise light end to the week in the UK could see Sterling trade relatively muted ahead of the election.


Dollar weakness caused the Euro to climb yet again, ending trading 1.3% higher on Wednesday.

Annualised inflation in Germany accelerated to its fastest pace since November this month. Consumer prices rose by 0.3% in April, mostly in line with expectations. The rate of price growth in Europe’s largest economy is also likely to keep accelerating in the coming months as energy prices increase and a weaker Euro increases the price of imports.

Lending in the Euro-area economy increased year-on-year for the first time in three years according to the European Central Bank yesterday. Private lending rose modestly by 0.1% in March following an extended period of nearly uninterrupted sharp monthly falls. Such data suggests that credit is more readily available and demand is returning.

German unemployment at 9am and Eurozone inflation figures at 10am (both GMT), likely to be the focal points of the day in the Euro-are this morning.


The US Dollar fell against its peers by 0.95% after weak growth data and the April FOMC statement.

The Fed acknowledged the slowdown in economic growth over the winter, but it stated that this partly reflects temporary factors, and expects moderate growth in the coming months. Beyond that, it stuck fairly close to the March message: the timing and extent of future hikes depend on the future evolution of inflation and the labour market. Given that the former has already shown signs of firming, and we expect the latter to bounce back strongly from recent winter-related weakness, we maintain our call for a June hike although this is now highly dependent on the April jobs report due the first week of May.

Earlier, growth in the US economy halted almost to a standstill in the first quarter as poor winter weather dampened consumer spending. Annualised growth fell short of even the most pessimistic of forecasts, with the world’s largest economy only expanding by 0.2% on a year previous. This was a big step down from the 2.2% growth experienced in the previous quarter, and well below the 1.0% that was widely expected. A strong Dollar, and a since-resolved labour dispute on the West Coast, will no doubt have also weighed on the economy. Initial estimations suggest that the harsh weather could have shaved 0.5% off growth, with port disruptions a further 0.3%. While there are tentative signs that the economy is pulling out of its early year soft patch, recent retail sales, manufacturing and home building data suggest that the recovery may be slower than anticipated.

Fallout and reaction from last night’s FOMC statement will no doubt dominate Dollar trading this morning. A number of smaller releases, like jobless claims, could lead to additional movement in the Greenback.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.