Positive US Data

Across the Atlantic, yesterday’s strong jobless claims and regional manufacturing data in the US have further strengthened market perception that the economy is gaining momentum. All eyes are focused on consumer sentiment and industrial production data in the US, which are likely to reaffirm the recovery in the economy. The only major headline in Europe was IMF’s approval of the loan for Greece. At home, Brent Broadbent, the BoE policymaker, has signalled that the BoE may change its current loose monetary policy stance, raising interest in BoE’s policy meeting minutes slated for release next week.

Pound Sterling – UK Markets

The Pound has strengthened against its major counterparts this morning after BoE policymaker, Ben Broadbent, opined that easing bank funding conditions and better credit supply may warrant tighter policy despite high UK private debt levels. However, he warned that the Eurozone crisis is at the heart of UK's economic woes. Fitch Ratings had late on Wednesday warned of a possible downgrade of Britain's “AAA” credit rating and downwardly revised its outlook to “Negative”. With a lacklustre day ahead, investors are keenly awaiting BoE’s last policy meeting minutes and Chancellor, George Osborne's budget plan, both slated for next week.

US Dollar – US Markets

The US Dollar has gained marginally against the Euro and is trading flat against the Pound. In the initial trading session, the US Dollar was marginally lower against the Euro after the IMF approved the much awaited €28 billion loan for Greece. Yesterday, data indicated robust manufacturing activity in the New York and Philadelphia regions for March and a more-than-expected decline in initial jobless claims, thus confirming an uptrend in the economy. This has dented hopes of additional monetary easing in the US. The recent strong regional manufacturing data is likely to reflect on industrial production data due later today, which is expected to register a growth for February. Other economic releases on the deck today include Reuters/ Michigan consumer sentiment index and consumer price inflation. Timothy Geithner, the US Treasury Secretary, has indicated that although the US economy is growing again, it faces tough challenges that call for measures to create more jobs and boost expansion.

Euro – European Markets

The Euro has slipped against the UD Dollar this morning as improving prospects for the US economy eased speculation that the US Federal Reserve would add additional stimulus. The ECB, in its monthly bulletin yesterday, indicated that adverse factors will weigh on economic activity in the Eurozone in the first half of 2012. Yesterday’s successful Spanish bond auction, coupled with the earlier robust Italian bond auction, has drawn attention to the efficacy of the recent liquidity operations by the ECB. Adding to the positive mood, Klaus Regling, the CEO of the EFSF, opined that efforts to contain the sovereign debt crisis are working but cautioned that Greece will need to “rigorously implement all measures agreed”. Meanwhile, the IMF approved the €28 billion loan for Greece as part of the second bailout. Today, the movement in the Euro is likely to be determined by the progress of the EU Trade Ministers meeting to be held later today. Additionally, Eurozone’s trade balance data is awaited and is expected to indicate that the region’s surplus shrank for January.

Other Currencies – Highlights

The Kiwi Dollar has edged lower against the US Dollar this morning. Yesterday, data indicated a decline in the ANZ consumer confidence index for March. However, the Bank of New Zealand’s business activity index indicated a rebound in manufacturing activity for February. Market participants stay focused on New Zealand’s GDP data due next week, which is expected to indicate that the nation’s economy slowed in the final quarter of 2011, with a decline in manufacturing sector offsetting robust farming output and improvement in retail trade and construction sectors.