IMF Growth Forecasts

With global economies showing signs of recovering from the prolonged economic slowdown over the past few months, markets will stay glued to the IMF’s World Economic Outlook report today, especially in the wake of positive comments made by the IMF Chief, Christine Lagarde recently. A steady progress towards economic recovery at home should see Britain’s growth projection get a facelift. While doubts persist regarding the strength of the US and Euro zone economic recovery, the duo are also likely to receive a positive assessment by the IMF. On the macro front, the German and Euro zone forward looking sentiment indices will be closely watched by investors. The recent positive mood in the currency bloc is expected to continue to reflect in these sentiment indices today.

Pound Sterling – UK Markets

In a relatively thin trading session yesterday, the Pound traded range bound against the US Dollar and remained under pressure against the common currency throughout the day, as investors preferred to stay on the sidelines ahead of the string of important domestic economic data tomorrow. With the BoE Governor, Mark Carney, playing down fears of a housing market bubble last week, tomorrow’s minutes of the latest BoE monetary policy meeting will be closely scrutinised by investors.. Additionally, the crucial unemployment report will also be on investors’ radar, especially in the wake of recent gains in the UK labor market. Meanwhile, the Pound is trading on a weaker footing against the greenback this morning. Later today, the CBI industrial survey and business optimism report will gain modest interest from market participants and is expected to show a slight cooling in trend in the nation’s manufacturing sector. Additionally, the Euro zone sentiment indices will prove crucial for the Pound against the Euro in the session ahead.

US Dollar – US Markets

The US Dollar traded broadly lower against the common currency in a holiday-induced light trading session yesterday. With no domestic economic data on tap, Friday’s relatively weak domestic economic reports, particularly the unexpectedly downbeat consumer sentiment numbers continued to weigh on the greenback against its peers. Furthermore, improving market sentiment towards the Euro zone also added to the US Dollar’s woes against the single currency. The greenback is trading stronger against the majors in today’s trading session. In the midst of a light domestic economic calendar today, the Euro-US Dollar pair will take direction from the German and Euro zone sentiment indices scheduled for release later today. Meanwhile, the slew of domestic economic data during the second half of the week, especially the manufacturing PMI and the crucial housing market reports together with the initial jobless claims numbers will keep investors on their toes. With several Fed policymakers calling for a continuation of QE3 tapering in recent days, positive housing and jobs data in the week ahead will add weight to the policymakers’ arguments.

Euro – European Markets

In the midst of a relatively subdued trading session, the common currency moved higher against the US Dollar yesterday. The upbeat German producer price index numbers largely contributed to the Euro’s gains against the greenback. The increase in producer prices in Germany has raised expectations of the consumer price inflation in the Euro zone’s largest economy also firming up in the near future. Additionally, buoyant Italian factory data also kept the Euro supported against its peers yesterday. Meanwhile, the single currency has nudged lower against the majors in today’s trading session. Investors keenly await the release of forward looking German sentiment indices today, especially after a report last week indicated that the nation’s economy expanded at a slower pace during the last year. Additionally, the Euro zone ZEW sentiment index and the IMF’s growth projections will also gain considerable market attention in the session ahead.

Other Currencies – Highlights

The Kiwi Dollar has gained traction against most of its major counterparts this morning following the release of better than expected domestic consumer price inflation print earlier today. Inflation in New Zealand picked up during the final quarter of 2013, raising hopes that the Reserve Bank of New Zealand will raise interest rates in its monetary policy meeting next week, thereby supporting the currency against its peers. The RBNZ is widely expected to hike borrowing costs next week, particularly in the wake of improving business sentiment, rising inflationary pressures and spiraling house prices in the nation. With little on the domestic macro front to alter market sentiment today, investors in the Kiwi Dollar will closely track new flows from across the globe for further direction. Furthermore, the domestic manufacturing PMI report and consumer confidence data later this week will influence the New Zealand Dollar’s movement against the majors in the near term.