A Quiet Start to a Busy Week

Markets are trading in a tight range this morning in the absence of any major catalyst. On Friday, the US Dollar lost ground following lower than expected consumer price inflation in the US and downbeat industrial production and consumer sentiment data. The downbeat data has spurred market speculation that the Federal Reserve may adopt further easing measures to boost growth in the nation. At home, a number of crucial economic releases lined up this week will govern Sterling’s movement over the coming days. Major releases include consumer price inflation, minutes of the BoE’s latest policy meeting and the UK budget.

Pound Sterling – UK Markets

The Pound has gained marginally against the Euro while it is trading steady against the US Dollar this morning. Data released earlier today indicated that UK house prices, as measured by Rightmove, climbed for March, underpinned by improvement in confidence, shortage of stock and continued rise in demand from first-time buyers. On Friday, the Pound had strengthened against the US Dollar as weak data in the US raised expectations of a further policy boost by the Fed. Markets are expected to closely watch BoE’s minutes due later this week to gauge the stance of the central bank’s policy makers on the need for additional easing. Meanwhile, data scheduled for release tomorrow is expected to indicate that the annual consumer price inflation in the UK eased for February. Along with the heavy economic calendar for the week ahead, market participants are looking forward to Chancellor, George Osborne’s deficit reduction plans, as he unveils the budget on Wednesday.

US Dollar – US Markets

The US Dollar has failed to register meaningful gains against the Pound this morning after lower-than-expected core inflation data released on Friday revived talks of additional stimulus. Additionally, downbeat industrial production and consumer sentiment data supported market speculation of further easing. On the macro front, this week’s slew of housing data will be kick started by the NAHB housing market index report slated later today and is expected to indicate an improvement in the US housing market. Moreover, traders brace themselves for housing starts and existing and new home sales data later this week. In today’s session, the US Dollar is likely to track the Federal Reserve’s policymaker, William Dudley’s speech for further cues on monetary policy.

Euro – European Markets

The Euro has weakened against the majors this morning after data released earlier today indicated that Italian industrial orders plunged for January, while Eurozone posted a current account deficit for January. Eurogroup Chief, Jean-Claude Juncker, opined that the Eurozone did not focus enough on Greek growth and that the austerity measures imposed in lieu of critical bailout funds have fuelled recession. On Friday, the Euro gained against the US Dollar after German Chancellor, Angela Merkel, indicated that European officials are mulling the combination of the two Eurozone’s bailout funds. Tomorrow, Italian Prime Minister, Mario Monti, holds talks to reconcile disputes and draft a labour reform aimed at boosting the nation’s competitiveness and shielding it from the Eurozone debt crisis. On the macro front, markets are expected to closely monitor the Eurozone construction output data due later today to gauge the strength of the construction sector.

Other Currencies – Highlights

The Kiwi Dollar is trading flat against the US Dollar as traders remain cautious ahead of New Zealand’s GDP data slated for release during the week. Markets expect the data to reveal a sequential slowdown in growth during the final quarter of 2011. Meanwhile, data released earlier today indicated an improvement in Westpac consumer confidence index and performance of services index. The Westpac consumer confidence index in New Zealand rose to a reading of 102.4 for the first quarter of 2012, while the performance of services index rose to a reading of 55.5 for February.