UK Inflation Eases Less-Than-Expected

The week started yesterday with some downbeat data on the US housing front. This has raised market interest in the nation’s building permits and housing starts data due later today. On the other hand, optimism towards high yield currencies was led by the completion of the initial phase of an auction to settle the credit default swap contracts on Greek government debt. At home, data just released indicates that while the annual consumer price inflation for February eased less-than-expected, the retail price index climbed more-than-anticipated. This could lead to increased uncertainty regarding the stance on monetary policy.

Pound Sterling – UK Markets

The Pound has retreated marginally against both the US Dollar and the Euro this morning. Data just released reveals that while consumer price inflation for February eased less-than-expected, the retail price index climbed more-than-expected for the same month. Yesterday, Rightmove recorded the biggest quarterly rise in UK house prices in eight years, fuelling hopes that the property market may be more robust in 2012 than the previous year. Further affirming the upbeat tone, BoE policy maker, David Miles, opined that house prices in the UK are likely to rise in the long term. The CBI survey of selling price trends is on tap for today. On Wednesday, market participants are eyeing the BoE’s minutes of the latest policy meeting and the annual budget, for hints on the government’s plan to manage the nation’s fiscal situation and initiatives to spur growth.

US Dollar – US Markets

The US Dollar has advanced against its major peers this morning owing to fears over China’s growth prospects. Mining sector heavyweights, BHP Billiton and Rio Tinto, have warned that the Chinese near-term growth is waning. The US Dollar had weakened against the majors yesterday after data indicated that home builder confidence in the US unexpectedly remained unchanged for March. This has raised doubts over the recent strong run of housing data. Meanwhile, additional easing measures remain in the realm of possibility after the New York Federal Reserve Bank President, William Dudley, cautioned that the US economy continues to be threatened by significant headwinds. Against the backdrop of yesterday’s dismal home builder confidence report, market participants are keenly eyeing the release of building permits and housing starts data due later today. The housing data is likely to set the tone for risk appetite in today’s trading session.

Euro – European Markets

The Euro has dipped against the US Dollar as concerns over global economic growth returned to spook markets. Additionally, Moody’s placed Spain under “Negative” outlook, citing challenging budgetary constraints. Yesterday, the Euro had strengthened against the US Dollar following weaker-than-expected home builder confidence data in the US. In a significant development, the initial phase of an auction to settle the credit default swap on Greek government debt was completed. In economic releases, German producer price inflation eased to a 20-month low for February, in line with market estimates. In today’s trading session, traders are focused on Italian Prime Minister, Mario Monti’s talks to draft labour reforms and Spanish and Greek bond auctions slated later today.

Other Currencies – Highlights

The Aussie Dollar has slipped, after minutes of the Reserve Bank of Australia’s latest policy meeting indicated that slowdown risks in Europe and an appreciating Australian Dollar were hampering the nation’s economic prospects. This has kept open the possibility of interest rate cuts in the near future. Further weighing on the Aussie Dollar were concerns over China’s growth prospects, after major mining firms warned of a possible slowdown in the Chinese economy. BHP Billiton warned that China’s steel production is slowing, while Rio Tinto indicated that near-term growth in the nation is weakening. Meanwhile, data released earlier today indicated an improvement in Australian leading index for January.