Janet Yellen in Spotlight

With yesterday’s British growth numbers indicating that the economy is indeed on a firm recovery path, the focus has now shifted to important economic releases from the Euro zone and the US due later today. While Euro zone sentiment indices will attract significant market attention, investors are expected to remain glued to the German consumer price inflation report, especially after the ECB Chief indicated that next month’s monetary policy meeting will be a critical event. In the US, the new Fed Chair, Janet Yellen’s testimony is expected to hog limelight today. Additionally, jobless claims and durable goods orders will influence investors’ risk appetite in the session ahead. At home, the overnight release of the consumer confidence report will be closely watched by investors for further direction. 

Pound Sterling – UK Markets

The Pound moved lower against the greenback yesterday following the release of buoyant US macroeconomic data but remained supported in the wake of largely promising domestic growth numbers released yesterday. Although annual GDP numbers were revised downwards, Sterling showed little reaction against its peers as the report confirmed that the UK economic recovery remained firmly on track during the final quarter of last year. Moreover, the substantial pick-up in business investments and exports pointed towards a balanced economic growth, reducing the over-reliance on consumer spending and raising hopes of sustained economic recovery in the year ahead. Meanwhile, geopolitical tensions in Europe aided the Pound notch up gains against the single currency in yesterday’s session. The Pound is trading lower against the US Dollar this morning as domestic macro releases take a backseat in today’s session in the midst of a raft of European and US economic data today. Sterling investors will keep a tab on global economic cues for further direction to risk appetite in the session ahead.

US Dollar – US Markets

The greenback strengthened against the majors yesterday as new home sales in the US surged for January to the highest level since July 2008, reversing the recent trend which indicated a broad weakness in the nation’s housing market due to harsh weather conditions. Meanwhile, the Cleveland Fed President reiterated what several policymakers have reinforced over the past few days, stating that the central bank is likely to continue tapering its stimulus measures as long as the economy performs as expected. The US Dollar is trading stronger against the common currency in today’s trading session tracking weak Spanish GDP data released earlier in the day and concerns surrounding Ukraine’s political landscape. Later today, the Fed Chief, Janet Yellen’s testimony before the Senate Banking Committee will be closely followed by market participants for hints on the central bank’s policy stance in the near term, especially against the backdrop of the mixed domestic economic data lately. Additionally, markets will keep a tab on US initial jobless claims and durable goods orders due later today for further direction.

Euro – European Markets

The disappointing fourth quarter Spanish GDP figures released earlier today has dragged the single currency lower against the majors this morning. While the Spanish economic recovery has remained intact, the weaker than expected growth numbers have dampened market sentiment towards the Euro. However, the upbeat German unemployment print has limited further declines in the common currency against its peers in today’s trading session. Investors will have the opportunity to make good their early morning losses later today if a raft of domestic economic releases, including the Euro zone consumer and business confidence reports and the German consumer price inflation numbers, surprise on the upside. Traders will especially eye the German inflation data as it will have a bearing on the aggregate Euro zone inflation print due tomorrow. The common currency traded in a tight range against the greenback in the initial trading session yesterday, even though data showed that the GfK consumer confidence index in Germany hit a seven-year high for March. Later in the day, the single currency weakened against the US Dollar following the release of positive US macro data.

Other Currencies – Highlights

The Swiss Franc is trading firmer against most of its major peers in today’s trading session, even though data released earlier in the day showed that the nation’s economy expanded at a slower than expected pace during the fourth quarter of 2013, as export of goods declined amid weak global demand. Moreover, the number employed people in Switzerland fell more than forecast during the fourth quarter, adding to the weak domestic economic data released recently. The disappointing macro data will add further weight to the Swiss National Bank’s decision to maintain a prolonged cap on the currency as obstacles continue to weigh down the nation’s economic recovery. With little on the domestic economic front, trading sentiment in the Swiss Franc will be influenced by news flows emanating from both sides of the Atlantic in the session ahead. Furthermore, investors will keep a tab on the domestic KOF leading indicator due tomorrow for further direction.