Sterling volatility increased sharply following the ECB policy conference.What next?

ECB policy was unchanged and rhetoric from President Draghi was broadly in line with expectations. The Euro, however, declined sharply with EUR/USD at fresh 3-month lows as long liquidation resumed.

The dollar overall maintained a strong tone despite a dip in US yields with the currency index at new 3-month highs as on-going short covering persisted.

US equities made firm gains and demand for defensive assets remained weak as gold declined 5-week lows with Korean hopes also positive for risk sentiment.

The yen resisted further losses as the Bank of Japan dropping references to when the inflation target would be met.

UK mortgage approvals data was slightly stronger than consensus forecasts for March, although there was still an annual decline of 10%. Consumer credit demand was the weakest for close to two years, maintaining concerns surrounding the consumer spending outlook, although there was a recovery in lending to the business sector which suggests a potential investment recovery.

There was a weak reading for the CBI retail sales survey with a reading of -2 for April from -8 previously. Retailers were optimistic surrounding the May outlook, but consumer confidence remained weak.

Sterling volatility increased sharply following the ECB policy conference with GBP/USD resistance on approach to 1.4000 followed by a rapid slide back below 1.3920 as the Euro crumbled. The single currency lost significant ground with a GBP/EUR rise to above 1.1500.