UK Consumer Price Inflation Eases Further

The just released inflation report at home has indicated a continuation of the recent easing trend in the nation’s inflation which might aid in boosting real wages in the UK and further prop-up the domestic economy. Further, tomorrow’s labour market numbers will give insights into the strength of the domestic economic recovery. In the US, while today’s inflation numbers will gain market attention, a speech from the Fed Chief, Janet Yellen, will undoubtedly generate maximum interest among market participants. Today’s German ZEW economic sentiment data looks unlikely to provide a helping hand to the Euro as it is expected to show deterioration for April. Additionally, the ongoing tussle in Ukraine has kept a tight lid on risk appetite.

Pound Sterling – UK Markets

The Pound has moved lower against its major counterparts in today’s trading session following the release of consumer price inflation numbers. Data just released indicated that consumer price inflation in the UK continued to ease for March, though it matched market expectations. However, the constant easing trend in the nation’s consumer prices over the past few months has further reduced the possibility of the BoE raising its benchmark interest rates in the near future. Additionally, output producer prices growth slowed for March, thereby highlighting subdued inflationary environment prevalent in the economy. Data released earlier today indicated that BRC retail sales dropped for March, its biggest annual decline since April 2013, mainly hit by the late timing of Easter this year. Meanwhile, a barrage of macroeconomic reports in the US along with the Fed Chief, Janet Yellen’s speech ahead of tomorrow’s domestic labour market numbers will keep Sterling investors interested. Better than expected US consumer confidence data released last week coupled with yesterday’s upbeat retail sales figures in the US continued to limit gains in Sterling against the US Dollar in yesterday’s trading session.

US Dollar – US Markets

Upbeat retail sales report led the US Dollar to trade on a firmer footing against the common currency in yesterday’s trading session. Retail sales recorded its largest gain since March 2012, thus providing more evidence that the economy is recovering from unfavourable weather conditions that were witnessed earlier this year. Also, dovish comments from a few ECB officials and continued worries in Eastern Europe further lent support to the greenback. The US Dollar is trading in a tight range, albeit on a stronger footing against its major counterparts in today’s trading session. Investors await a raft of domestic macroeconomic data including consumer price inflation report which is likely to show an uptick for March. Additionally, the New York state manufacturing activity and NAHB housing market reports for April will provide initial insights about the US economic recovery during the second quarter of 2014, especially after the first quarter figures looked somewhat distorted due to harsh weather conditions prevalent in the nation. However, the Fed Chief, Janet Yellen’s speech later today will attract maximum market attention.

Euro – European Markets

The Euro failed to register gains against the US dollar yesterday after the ECB President, Mario Draghi, indicated that a further strengthening of the exchange rate would compel the central bank to unveil additional stimulus in order to prevent inflation from falling further. Also, the demand for the common currency continued to remain under pressure amid fresh worries in Ukraine as the risk of military action by Kiev against pro-Russian separatists mounted. Besides, there is a growing belief that the US and EU could impose additional economic sanctions on Russia if the situation deteriorates further. The better than expected Euro zone industrial production numbers failed to lift the Euro against the US Dollar in yesterday’s session. Meanwhile, the single currency has continued to remain under pressure against the greenback this morning. Going forward, markets will keep a tab on the ZEW economic sentiment data in Euro zone and Germany which is expected to show deterioration for April. Also, a slew of macro data in the US and the Fed Chief’s speech scheduled later today could possibly alter risk sentiment.

Other Currencies – Highlights

The Aussie Dollar is trading on a weaker footing against the greenback after the minutes of the RBA’s latest monetary policy meeting indicated that interest rates in Australia are likely to remain steady for the near term, if the economy continues to improve. The RBA also stated that that the exchange rate is still high by historical standards. However, the Aussie Dollar shrugged off better than expected US retail sales print yesterday and traded on a firmer footing against the greenback. With no major domestic macro reports today, market participants will keep a close watch on the US consumer price inflation report along with a speech from the US Fed Chief for further cues to risk appetite. Also, tomorrow’s raft of Chinese economic data, including first quarter GDP numbers, monthly industrial production and retail sales figures, will keep investors on their toes. Any deterioration in the health of the world’s second largest economy is likely to weigh on the performance of the Australian Dollar against the majors.