US Consumer Sentiment Data in Focus

The BoE preferred to adopt a wait and watch approach yesterday with regards to its monetary policy as policymakers bought further time to ascertain the underlying strength of the economy. Against this backdrop, next week’s crucial inflation and labour market reports will hold market interest for hints on recovery during the first quarter of 2014. Across the Atlantic, today’s consumer sentiment data is likely to add weight to the notion that the US economic recovery is back on track following the weather induced slowdown of late. Meanwhile, talks of quantitative easing in the Euro zone received a boost after the IMF Chief, Christine Lagarde, stated that the ECB might soon launch stimulus to fight low inflation in the region.

Pound Sterling – UK Markets

The BoE, as widely expected, held its key interest rate at a record-low of 0.5% citing a slack in the domestic labour market, leading the Pound to trade under pressure against the majors yesterday. With consumer price inflation hovering near a four-year low and below the central bank’s 2% target, the BoE appears in no hurry to increase interest rates despite the recent spate of macroeconomic data suggesting that economic recovery is on track. Additionally, better than expected initial jobless claims and budget deficit figures in the US limited the upside in the Pound against the US Dollar. Sterling is range bound against most of its major counterparts this morning. With lack of decisive triggers in the UK today, market participants will keep a tab on US consumer confidence report for further signs of recovery in the world’s largest economy. Meanwhile, investors have their plates full in terms of macro data scheduled in the forthcoming week, including consumer price inflation and employment data, for further hints about the strength of domestic economic growth during the first quarter of 2014.

US Dollar – US Markets

The US Dollar continued to slide against its major peers in yesterday’s trading session, as traders dumped the greenback after the latest FOMC minutes hinted that policymakers are not inclined to adopt tighter monetary policy measures in the immediate future. Meanwhile, the labour market data showed encouraging signals as the number of people filing for initial jobless benefits fell last week to the lowest since May 2007. Additionally, the monthly budget deficit narrowed more than anticipated for March, partly helped by an increase in the government’s revenue. The budget deficit for the first six months of this fiscal year is considerably lower than the levels recorded in the same period last year, further reflecting that steps undertaken for fiscal consolidation appears to be yielding results. However, the upbeat macro data failed to lift the US dollar against the majors in yesterday’s session. In today’s trading session, the greenback is trading in a tight range against most of its major counterparts. Investors will keep a close eye on today’s Reuters/Michigan consumer confidence report along with producer price inflation figures for further direction. In the forthcoming week, markets await a slew of domestic macro data.

Euro – European Markets

The Euro is trading in a tight range against its major counterparts in today’s trading session. Data released earlier today indicated that consumer price inflation in Germany eased for March but remained unchanged compared to the preliminary reading. The inflation numbers did little to alter investors’ sentiment, especially after the ECB President, Mario Draghi, last week emphasised the importance of Euro area inflation data for April which will be helpful to determine whether the central bank would further ease its monetary policy. The IMF Chief, Christine Lagarde, added fuel to fire by indicating that Euro zone is likely to launch a stimulus programme. Against this back drop, next week’s Euro area inflation report will attract most of the market attention along with German ZEW sentiment and Euro zone industrial production data. Meanwhile, investors will keep a close watch on the US Reuters/Michigan consumer sentiment report today. Yesterday, the Euro traded on a firmer footing against the US Dollar as the FOMC minutes revealing a dovish stance among policymakers over raising interest rates in the future overshadowed upbeat US initial jobless claims and budget deficit reports.

Other Currencies – Highlights

The Japanese Yen is trading lower against its major counterparts in today’s trading session. The Bank of Japan’s latest policy meeting minutes released earlier today revealed that policymakers agreed that the Japanese economic recovery and inflation are moving in line with the central bank’s expectations. The minutes further revealed that the hike in sales tax will not derail consumer spending, given the improvement in the domestic labour market lately and that the central bank is unlikely to resort to further easing measures in the near term. With no more domestic economic data scheduled today, investors in the Japanese Yen will keep a tab on news flows emanating from across the Atlantic, along with updates from the IMF and G20 meetings. In the forthcoming week, the domestic industrial output and consumer sentiment reports will gain market attention. Additionally, a slew of global macro releases will prove crucial for the Japanese Yen against the majors next week.