Currency markets are likely to keep a close watch on upcoming economic data from the US during the course of the week in order to ascertain the overall impact of rough weather conditions in the US. Apart from this week’s US GDP figures and important consumer related barometers, the Fed Chief, Janet Yellen’s testimony before the Senate on Thursday will attract maximum attention to gauge prospects of the Fed approach in light of the recent spate of soft economic releases.
Today’s results from the Ifo German survey revealed an upside for February, in line with the economic recovery witnessed in the Euro zone in the latter half of 2013. The Euro zone inflation figures will hog limelight today. On the domestic front, GDP figures mid-week will attract attention.
Pound Sterling – UK Markets
Although the Pound initially seemed unfazed against its peers after a seemingly disappointing retail sales data on Friday, Sterling witnessed considerable selling pressure against the greenback and the single currency in the latter half of the trading session, as somewhat soft economic releases from the UK in the recent past appears to have prompted traders to adopt a cautious approach ahead of the upcoming UK GDP figures this week. The Pound is hovering in a tight range against its peers in today’s session, as traders remained on the side lines in the absence of any major economic data. However, this week’s GDP figures from the UK is likely to attract a major chunk of traders’ attention in order to decipher growth drivers in the economy and evaluate prospects of the British economy meeting the upgraded growth projections by various influential agencies.
Meanwhile, market surveys related to the UK retail sector and consumer morale will gain some market attention for measuring the impact of abnormal weather conditions in Britain. With no major domestic economic releases scheduled today, macro events from the Euro zone and US will have a greater bearing on the Pound in today’s session.
US Dollar – US Markets
The greenback declined against its majors on Friday, after data showed a decline in US existing home sales numbers, which hit its lowest level since July 2012 and was attributed mainly due to severe cold weather along with rising mortgage rates and ongoing inventory shortage. However, losses were limited after the US Fed officials, Richard Fisher and James Bullard, downplayed the recent weakness by reiterating that the US central bank will continue to scale down its monthly asset purchases if the domestic economic growth remains on track.
The US Dollar is trading on a weaker footing against most of its major counterparts this morning ahead of Chicago Fed national activity index and services PMI figures later today. Later in this week, market players will continue to pay a close attention to the revised fourth quarter economic growth data, durable goods orders and consumer confidence print for further hints on the strength of the domestic economy. The Fed Chair Janet Yellen’s testimony coming Thursday will be also on investors’ radar for her comments on the impact of weather on economic activity as well as any changes to the stimulus tapering schedule.
Euro – European Markets
The Euro moved higher against the greenback on Friday, registering a third consecutive weekly gain, after data revealed that existing homes sales in the US dropped to an 18-month low for January, thus raising concerns that serve weather conditions might lead the US economy to lose its growth momentum during the first quarter of 2014.
However, the single currency has limited its downside against the US Dollar this morning as data just released revealed that the Ifo business climate index in Germany unexpectedly improved to a 31-month high for February, thus indicating that economic recovery is gaining momentum in the Euro bloc’s largest economy. The single currency declined against its majors earlier today after the ECB Chief, Mario Draghi, reiterated the central bank’s willingness to provide additional stimulus, if the Euro zone’s inflation outlook deteriorates. Against this backdrop, the Euro investors will keep a close watch on today’s final reading of Euro zone consumer price inflation figures for January ahead of the first reading for February scheduled later in the week. Additionally, a raft of crucial economic data in Germany and Euro zone scheduled this week holds relevance for market participants.
Other Currencies – Highlights
The Australian Dollar was trading under pressure against the majors earlier today amid a broader weakness in market sentiment. The outlook for the Australian economy, which has closer trade ties with China has darkened after data showed that new home price growth in first-tier cities in China slowed in January after local governments introduced property curbs to limit escalating prices and banks tightened lending to property developers. However, the Aussie Dollar has recovered most of its losses against the greenback this morning.
With little on the domestic economic calendar going forward today, market participants will keep a tab on news flows emanating from global markets for further direction. Apart from private sector credit data in Australia during this week, traders will eye a raft of economic data in Europe and US to gauge economic conditions in these regions and the overall risk appetite amongst traders.
Sterling Rises on Hopes of EU Softening Tone on Backstop