Strong UK Industrial Output Data Lifts Sterling

The just out positive domestic industrial production report has shown that recovery in the nation’s industrial sector continues to gain steam, thereby highlighting that a broad-based economic recovery is underway in the UK. Today’s NIESR GDP report and some important domestic economic releases in the next few trading sessions will provide further insights about the same. In the Euro zone, ECB policymakers downplayed talks of the central bank resorting to asset purchases in the immediate future, slightly in contrast to the ECB Chief’s views expressed last week. Against this backdrop, domestic economic data over the next few months will prove crucial for the central bank’s policy stance going forward. Across the Atlantic, speeches by Fed policymakers will keep markets interested in the session ahead.

Pound Sterling – UK Markets

The Pound rebounded from its previous session losses and moved higher against the US Dollar in yesterday’s trading session. Though last week’s construction, manufacturing and services activity data disappointed markets, it continued to point towards expansion. With the recent spate of broadly encouraging economic data, the BoE is unlikely to alter its policy stance during its meeting scheduled later this week, as the setback seems to be temporary due to unfavourable weather conditions. In today’s trading session, Sterling has strengthened and temporarily breached the crucial 1.67 mark against the US Dollar this morning after data just released indicated that both industrial and manufacturing production data for February surpassed market expectations. This is likely to provide confidence to market participants about the strength of recovery during the first quarter of 2014. Also, the NIESR GDP estimate report will attract market attention and is expected to show that the domestic economic growth remains on track. Along with the GDP estimate, the BRC shop price data due later today will also be eyed for further direction.

US Dollar – US Markets

The greenback traded on a weaker footing against the single currency yesterday as some ECB officials showed reluctance for immediate stimulus measures, slightly divergent to the ECB Chief, Mario Draghi’s comments last week. Meanwhile, the St. Louis Fed President, James Bullard, opined that the latest employment data showed a rebound in hiring for March. In the wake of recent encouraging data, he further indicated that he expects inflation to head towards the Fed’s 2% target. In today’s trading session, the US Dollar has moved lower against its major counterparts. The NFIB small business optimism will be eyed and is likely to show an improvement for March, shrugging off previous uncertainty about the pace of growth following weather related disruptions caused to earlier readings. Also, speeches from few Fed officials will attract market attention, while tomorrow’s minutes of the US Fed’s March policy meeting will offer deeper insights into the Fed’s future plans. Traders will also be watchful of upcoming corporate earnings from the US in order to gauge the overall health of the private sector.

Euro – European Markets

The single currency advanced against the US Dollar in yesterday’s trading session following comments from ECB officials, Ewald Nowotny and Yves Mersch, that plans for additional monetary easing are not imminent. The latest comments from ECB policymakers seem to have calmed market anxiety, especially considering the ECB Chief’s dovish comments last week. The mixed views affirm that policymakers remain undecided over the future course of policy action and economic trends in the second quarter will remain a key determinant for future plans. Against this backdrop, the Bundesbank President, Jens Weidmann’s speech later today will attract market attention for insights into his views on the monetary policy front. Separately, yesterday’s report revealed that Sentix investor confidence in the Euro zone rose to the highest level in three years for April. Meanwhile, the Euro is trading in a tight range against the majors this morning. With lack of macro data across Europe today, markets will keep a tab on inflation reports from some Euro zone economies along with speeches from few ECB officials during the week.

Other Currencies – Highlights

The Japanese Yen is trading firmer footing against the US Dollar this morning after the Bank of Japan unanimously left its key interest rate stable and maintained its asset purchase programme while keeping its inflation outlook unchanged. Furthermore, the BoJ Governor, Haruhiko Kuroda, opined that the domestic economy is set to continue its modest recovery, mainly due to robust consumer demand, despite the 3% increase in sales tax which came into effect earlier this month. It remains to be seen whether this optimism about the domestic economy actually translates into the central bank achieving its inflation target in this fiscal year. Separately, data released earlier today showed that Japan swung to a current account surplus, following a rise in investment income. With lack of further decisive triggers in Japan today, markets will keep a tab on tomorrow’s minutes from the US Fed’s latest policy meeting for further direction to risk appetite.