After a long wait, Eurozone finance ministers finally approved the second bailout package for Greece, with the first tranche of payment likely to be granted this month. Much of the action in today’s trading session will be across the Atlantic where the outcome of the crucial Fed monetary policy meeting is awaited, along with retail sales data that is likely to be upbeat. Additionally, German ZEW survey is also expected to garner market interest later today.
At home, following an improvement in RICS house price data earlier today, the trade balance report just out indicates that visible deficit widened for January.
Pound Sterling – UK Markets
The Pound has gained against the majors this morning, after the Royal Institution of Chartered Surveyors’ (RICS) indicated that British house prices for February fell at their slowest pace since July 2010, highlighting recovery in the housing market. Additionally, striking an upbeat note, the Organisation for Economic Co-operation and Development (OECD) indicated that the British economy is in the early stages of recovery, which would form part of a wider global rebound.
Meanwhile, concerns over contagion in Europe resurfaced following European leaders calls for deeper fiscal cuts in Spain. This has aided the Pound against the Euro in this session.
In data just released, UK’s visible trade deficit widened for January, while the DCLG house price index climbed for the same period.
In the absence of any significant economic release today, the movement in Sterling is expected to be largely driven by external factors such as the upcoming Fed meeting and developments in Europe.
US Dollar – US Markets
The US Dollar has gained against the Euro and held firm against the Pound ahead of the key US interest rate decision later today.
The outcome of the Federal Open Market Committee (FOMC) meeting is likely to be closely tracked for the tone of the post-meeting statement, after a slew of recent upbeat economic data dented speculation about further easing measures. However, the talk of “Sterilized QE” last week has revived hope that the Fed has further easing in mind and may unveil the new concept in the near future. Markets expect interest rate to be kept unchanged in today’s policy meeting.
Additionally, retail sales data is expected to be of much interest to market participants and is anticipated to be largely positive. Other key releases include business inventories, IBD/TIPP Economic Optimism and NFIB Small Business Optimism.
Euro – European Markets
The Euro gave up initial session gains against the US Dollar, as concerns over Spain came to the fore. European leaders urged Spain to impose deeper budget cuts to prevent the region’s debt crisis from hampering the Spanish economy.
Initially, the currency had gained against its major counterparts, after the EU finance ministers granted political backing to the €130 billion Greek bailout plan. A relieved Greek Finance Minister, Evangelos Venizelos, indicated that the situation has changed for Greece, but the nation must continue to implement its austerity program.
On the macro front, markets await German and Eurozone economic sentiment indices due later today, which are largely expected to be positive following the recent liquidity injection by the ECB. Meanwhile, data released earlier today indicated that annual French consumer price inflation held steady for February.
Other Currencies – Highlights
The Aussie Dollar has gained against the US Dollar ahead of the FOMC meeting and Australian Westpac consumer confidence data slated later today.
The currency remained unperturbed, even as the nation’s NAB business confidence index dropped to a five-month low for February. The survey indicated that the Australian Dollar’s strength and the Reserve Bank of Australia’s decision to keep interest rate on hold, weakened sentiment. Adding to the slew of weak indicators, another release indicated a decline in Australian home loan approvals for the first time in 10 months, pointing towards a slowing housing market.
Dollar Weakens as Fed Turns Dovish, Eyes on BoE
Euro Plummets as Draghi Opens Door For Rate Cuts
British Pound Stays Under Pressure Ahead of Tuesday's Vote