Nationwide House Price Report

Although Janet Yellen confirmed that the Fed will stay on the path of QE3 tapering this year, the recent weak US economic reports have left investors confounded about the strength of the nation’s economic recovery. Against this backdrop, a raft of US macro data today and next week will give clear insights about the same. In the Euro zone, the domestic inflation report today will be on investors’ radar, especially in the wake of the unexpectedly weak German inflation print yesterday. At home, the upbeat Nationwide house price report has lifted the Pound above the 1.67 mark against the greenback today. Going forward, Mark Carney’s speech will be in focus for his views on the current state of affairs in the economy.

Pound Sterling – UK Markets

In the midst of a relatively light domestic economic calendar, the Pound moved higher against the US Dollar but traded range bound against the Euro in yesterday’s trading session. Weak economic data from the US helped Pound to gain traction against the greenback yesterday. A similar trend is likely to be followed in today’s trading session as markets await a raft of global economic data in the session ahead. The domestic consumer confidence data for February released overnight, which remained at the highest level since September 2007, had little effect on Sterling against its peers. However, the upbeat Nationwide housing price report released earlier today has lifted the Pound against the majors this morning. Later today, Sterling investors will eye the BoE Governor, Mark Carney’s speech for hints about the central bank’s policy stance going forward. Additionally, a slew of US and Euro zone macro releases will determine trading sentiment in the Pound against the majors in the session ahead. Looking ahead, amid a raft of domestic economic data next week, investors will closely monitor the BoE monetary policy meeting for further direction.

US Dollar – US Markets

The Fed Chief, Janet Yellen’s admission before the Senate Banking Committee concerning weak US economic data lately, together with the release of another mixed bag of domestic macro releases, dragged the US Dollar lower against its major counterparts yesterday. While Yellen reinforced that the central bank will continue scaling down bond purchases, the unexpectedly weak labour market report and a marginally better than expected durable goods orders print failed to entice investors towards the greenback. Additionally, the Atlanta Fed President, Dennis Lockhart, opined that interest rates in the nation are likely to remain at low levels for a prolonged period of time. The greenback is trading in a tight range against the Euro, but has weakened against the Pound this morning. Investors will keep a tab on the revised fourth quarter domestic GDP, the Reuters/Michigan consumer sentiment report and pending home sales data for further direction to risk appetite today. Any further deterioration in the economic landscape is likely to put further pressure on the greenback against the majors.

Euro – European Markets

Despite yesterday’s unexpectedly weak German consumer price inflation report, the Euro moved higher against the US Dollar tracking mixed US economic data. The dismal German inflation numbers has now shifted market focus towards the Euro zone inflation report today which is expected to show that inflationary pressures in the region further subsided for February. However, the ECB President, Mario Draghi, opined that although inflation continues to remain low, the Euro zone is not in deflation at present and that the central bank will monitor inflation and act if necessary. Against this backdrop, next week’s ECB meeting will attract considerable market attention. Meanwhile, despite inflation worries, sentiment indices in the currency bloc continued to tread higher. The single currency is trading firmer, albeit in a tight range, against the US Dollar this morning even though data released earlier today showed a better than expected rise in German retail sales for January. Later today, apart from the inflation report, investors will also keep a tab on Euro zone labour market numbers and US macro releases today for further direction.

Other Currencies – Highlights

The Japanese Yen has strengthened against its major counterparts this morning following buoyant domestic economic data released earlier in the day. While consumer price inflation fell less that forecast for January, the industrial production report comfortably beat market estimates. Furthermore, Japan’s retail sales also surged for January, highlighting the overall strength in the nation’s economy boosted by increased consumer spending. Meanwhile, the unemployment rate remained steady for January, while manufacturing PMI declined, but continues to remain firmly in the expansion zone. However, it remains to be seen how the proposed sales tax hike in April 2014 will affect the economy and consumer sentiment as a whole. With little on the domestic economic front today, investors in the Japanese Yen will closely follow news flows emanating from both sides of the Atlantic for further direction. Looking ahead, the domestic consumer confidence print and a string of global macroeconomic reports will influence market sentiment towards the Japanese Yen in the forthcoming week.