At home, minutes of the Monetary Policy Committee’s March meeting just released indicate that two of the members wanted to raise the target for bond purchases by £25 billion. In the backdrop of the recent warning from Fitch that the UK could lose its “AAA” credit rating, traders are eyeing the nation’s budget due later today.
Turning to the Eurozone, the Greek Parliament has approved the second bailout package from the Troika which has supported gains in the Euro. Across the Atlantic, the busy week for housing data continues, with existing home sales data on radar today.
Pound Sterling – UK Markets
The Pound crossed the crucial 1.59 mark against the US Dollar this morning but has since returned to the 1.588 mark. Against the Euro the Pound remains relatively flat. The minutes of the BoE’s latest policy meeting just released reveals that two of the members wanted to raise the target for bond purchases by £25 billion. Additionally, the UK government borrowed almost twice as much as expected for February.
Yesterday’s data indicating that consumer price inflation in the UK slowed for a fifth consecutive month for February to reach the lowest level in fifteen months has spurred optimism that low prices are likely to allow consumers to increase spending.
Meanwhile, traders brace themselves for the UK’s annual budget due later today wherein the Chancellor is expected to stick to a tough austerity plan. The budget will be closely watched for the weightage of growth enhancing measures in comparison to deficit reduction efforts.
US Dollar – US Markets
The US Dollar has weakened against the majors amid optimism surrounding Greece after the nation won the parliamentary approval for the second bailout package.
However, losses in the US Dollar against the majors were capped after Minneapolis Fed President, Narayana Kocherlakota, maintained his hawkish tone and opined that the central bank may need to raise rates as soon as this year if unemployment continues to decline and inflation threatens to rise.
Yesterday’s economic reports painted an upbeat picture of the US housing sector. Building permits for February rose to the highest level since October 2008, while housing starts, which slipped marginally, hovered around a three-year high. In tune with this sentiment, existing home sales data on tap today will be of interest to investors. Markets anticipate sales for February to climb to the highest level since May 2010.
Euro – European Markets
The Euro has strengthened against the US Dollar after Greece won the parliamentary approval for its second international bailout worth €130 billion. Moreover, a Troika report revealed that Portugal’s fiscal adjustment programme is “on track” and continues to exceed expectations. This has allayed contagion fears among traders.
Meanwhile, investors are also eyeing cues from German €5 billion two-year note auction and €2 billion of inflation-linked bonds due in April 2023. Additionally, Portugal is scheduled to auction as much as €2 billion of treasury bills.
In the absence of major economic releases today, market awaits tomorrow’s crucial PMI data in Europe which is expected to aid traders to gauge the impact of the recent liquidity measures undertaken by the ECB. Market anticipates Eurozone and German manufacturing and services sector activities to indicate an improvement for March.
Other Currencies – Highlights
The Yen has registered a decline against the Pound and the Euro as traders shunned safe haven currencies after the Greek Parliament approved the nation’s second aid package.
To add to the weakness, concerns over the health of the Japanese economy spooked market participants. Data released earlier today indicated a more-than-expected drop in Japanese all industry activity for January. The decline came on the back of data released in the previous week which indicated a contraction in the tertiary sector for January.
Markets are expected to closely monitor tomorrow’s trade balance data which is expected to indicate a narrower trade deficit for February.
British Pound Suffers Losses Ahead of Tuesday's Critical Vote