The Dollar has edged weaker with GBP/USD back up near 1.30 and the EUR/USD cross stable near 1.09.
UK GDP growth ground to a halt in Q4 2019, in line with analyst and Bank of England forecasts, dragging year-on-year growth down to only 1.1%. However, more positively, Q3 GDP growth was revised upwards to 0.5% qoq from 0.4% qoq. In any case, these are now “old” data (Q4 figures are on average three months old) and the central bank’s and analysts’ focus will be on Q1 2020 macro data. The Bank of England has set the bar pretty low, forecasting only 0.2% qoq GDP growth in the first quarter of the year (albeit with scope for upside), despite widespread expectations of a post-general election rebound in consumer demand and investment.
The big story overnight however was the Reserve Bank of New Zealand’s far more hawkish than expected bias. Markets were expecting the RBNZ to keep rates on hold at 1.00% but to maintain an easing bias given the negative impact of the coronavirus on regional economic growth. Instead the RBNZ said it was done with policy rate cuts for 2020 and projected a rate hike later in 2021, citing fiscal policy as a reason for the change in monetary policy outlook. The Kiwi Dollar surged 1% versus the US Dollar in the wake of the announcement.
