BoE Policy Meeting Today

The BoE monetary policy meeting today is likely to be a low-key affair, with the central bank fixed on maintaining its current policy stance. Meanwhile, the incoming economic data from China continued to indicate that the nation’s economy is witnessing turbulence and prospects of a “hard landing” could possibly jeopardise the global economic recovery. Across the Atlantic, yesterday’s FOMC minutes showed that policymakers appeared in no rush to alter interest rates, thereby reducing uncertainty that prevailed after the Fed Chief’s post-meeting press conference. In the Euro zone, today’s ECB monthly report has further highlighted the central bank’s concerns about low inflation in the currency bloc.

Pound Sterling – UK Markets

The Pound is trading in a tight range against its major counterparts this morning as investors remain on the sidelines ahead of the BoE monetary policy meeting later today. However, the central bank is unlikely to change its policy stance, given that inflation and unemployment indicators are perched close to the central bank’s target rate. With the BoE steering clear of altering its conventional and unconventional policy tools for more than a year now, it remains to be seen if steady signs of improvement in the British economy prompts the BoE to abandon its accommodative policy measures any time soon. Data released yesterday indicated that trade deficit in the UK narrowed more than expected for February, as imports fell faster than exports. Sterling’s reaction to the trade data was fairly muted against the US Dollar. However, the Pound rose later and inched closer to the 1.68 mark against the US Dollar after the keenly awaited minutes of the US Fed’s latest policy meeting revealed a dovish slant among policymakers.

US Dollar – US Markets

The US Dollar was under pressure against the majors, as traders appeared scaling back their bets on the greenback amid signs that a hike in interest rates in the US would be a gradual process. Although the Fed Chief, Janet Yellen’s comments following the recent monetary policy meeting ruffled a few feathers, yesterday’s FOMC minutes strongly reflected a dovish sentiment among Fed policymakers and speculation of a sooner than expected hike in interest rates currently appears far-fetched. Meanwhile, the greenback continues to hover close to yesterday’s lows, as traders await fresh cues for further direction. In today’s trading session, markets will keep a close watch on jobless claims report which is likely to show a drop in the number of claimants for jobless benefits last week. Also, today’s monthly budget statement is likely to garner some attention in order to gauge if the US economy is on course to post a lower budget deficit this year.

Euro – European Markets

The Euro advanced against the US Dollar yesterday after the US Fed minutes indicated that policymakers still remain unclear over the timeline to hike interest rates, thereby echoing similar tone of few Fed officials over the past month. Earlier, data indicated that trade surplus in Germany unexpectedly narrowed for March as exports fell more than anticipated, thereby indicating that the pace of recovery in the Euro area’s largest economy still remains fragile. Meanwhile, the common currency is trading in a tight range against most its major counterparts this morning. Data released earlier today indicated that the French consumer price inflation eased for March. This is likely to have a bearing on the next week’s Euro zone consumer price inflation report which is likely to confirm an easing trend in inflation in the region. However, following dovish comments from few ECB policymakers lately, investors will keep a tab on April inflation figures due later this month for further cues to risk appetite. Meanwhile, the ECB monthly report just released has highlighted the central bank’s worries over the low inflation environment prevalent in the Euro bloc.

Other Currencies – Highlights

The Kiwi Dollar is trading near 32 month highs against the greenback following upbeat domestic manufacturing report released earlier today. Data indicated that manufacturing activity in New Zealand continues to expand for the 19th consecutive month for March, helped by strong production and new orders. However, further gains in the Kiwi Dollar were tempered following weak Chinese trade data for March which showed an unexpected drop in both exports and imports. The US Fed minutes of its latest policy meeting revealed that an interest rate hike in the US might not happen at least until the second half of 2015, providing support to the New Zealand Dollar against the greenback in yesterday’s trading session. With no major domestic macro data scheduled this week, investors will keep an eye on New Zealand’s consumer price inflation report due next week to gauge inflationary pressures in the nation. Going forward, markets will keep a tab on today’s US initial jobless claims and tomorrow’s Reuters/Michigan consumer sentiment figures for further direction.