Today’s session ahead would be a quiet one, given little on the economic calender and a US holiday. With the much awaited G20 meeting concluding during the weekend, leaders stood firmly against protectionism and against manipulation of exchange rates, although there was no direct reference to Japan. Against this backdrop, today’s comments by the ECB President should be keenly watched.
There are some important economic events lined up in both the US and Europe this week, which could play a pivotal role in determining risk sentiment. At home, the BoE’s minutes remain a key highlight this week, while public finances and labour market figures are also expected to grab market attention.
Pound Sterling – UK Markets
The Pound is trading close to Friday’s lows against the US Dollar in today’s trading session, as retail sales data from the UK further heightened concerns over the dire state of the UK economy, keeping the possibility of the BoE re-starting its asset purchases alive. However, data from Rightmove indicated that asking house prices in the UK have returned to the levels seen during the pre-crisis period.
Echoing views of most of the policy makers at the BoE, rate setter, Martin Weale, dismissed the idea of nominal GDP targeting and warned that the shift in the central bank’s stance could potentially increase upside risks to inflation. In this context, the minutes of the BoE’s latest monetary policy meeting due later in the week will be closely watched given the higher inflation projection in the central bank’s inflation report released last week.
With little of market interest today, the labour market report and public finance data in Britain scheduled for release later during this week is expected to garner market interest.
US Dollar – US Markets
Considering a light economic calendar, the US Dollar has started today’s weekly session on a firmer footing against the majors, as traders await for further cues for the currency movement.
Adding to signs that the broader economic recovery remains on track, data released on Friday indicated that consumer sentiment in the US climbed to a three month high for February, buoyed by improving outlooks for the job and housing markets. However, industrial and manufacturing output unexpectedly fell for January largely affected by a slowdown in motor vehicle output. With the US economy not completely out of the woods, the Fed Chairman, Ben Bernanke indicated that the central bank would continue with its current accommodative monetary policy, as the nation is yet to make full come back.
With US markets closed on account of a holiday, markets await minutes of the FOMC’s latest monetary policy meeting scheduled for release later in the week. Additionally, a raft of economic releases that includes housing and inflation data will play an important role in determining the near term trend for the greenback.
Euro – European Markets
The Euro is trading under pressure against the greenback this morning, as traders remain on the sidelines ahead of the ECB President, Mario Draghi’s speech in Brussels later today. His views on the current state of the economy and the recent strengthening of the single currency would likely garner most of the market attention. Additionally, any indication on the future course of monetary stance would be closely watched.
Meanwhile, Friday’s trade balance data indicated that the Euro-area registered a larger than expected trade surplus for December. However, today’s Eurozone current balance is not expected to be much of market mover, given market focus on other key economic indicators during the week. Traders are expected to keep a tab on PMI releases and sentiment indices slated for release later in the week to gauge the performance of Eurozone following a contraction seen in the last quarter. With the last month’s sentiment indices indicating an improvement, an upward trend would likely signal a potential revival for the region’s economy going forward. The ECB board member, Joerg Asmussen, also sounded quite optimistic that the Eurozone is in a better position than a year ago.
Other Currencies – Highlights
The Kiwi Dollar has declined against the US Dollar and the Euro in today’s trading session, as traders await the Reserve Bank of New Zealand Governor, Graeme Wheeler’s speech later this week. Comments from influential policy makers across the globe have contributed to the recent volatility in currency markets. Traders are likely to keep a close eye on the Governor’s views on the recent strength witnessed in the New Zealand Dollar.
On the domestic front, data today revealed that services activity expanded at a faster pace for January, largely supported by easing global concerns. With US markets taking an off today, traders are likely to monitor developments from Europe for further insights into risk appetite. Meanwhile, producer price inflation and credit card spending data remain the key macro releases from New Zealand during this week.