Mark Carney's Speech Ahead of Tomorrow's Budget

The BoE Governor, Mark Carney’s speech is the only major domestic event today as investors brace for tomorrow’s annual Budget, despite little expectations of any major fiscal move by the Chancellor, George Osborne. Across the Atlantic, today’s inflation and housing market numbers will attract market attention ahead of the Fed monetary policy decision tomorrow, the first under the central bank’s new Chairperson, Janet Yellen. The Euro zone and German forward looking sentiment indices reports will also gain considerable market interest in the session ahead. However, following widespread criticism of Russia and sanctions imposed on it by the US and the EU, the Russian President’s address to the Federal assembly will keep investors on their toes today.

Pound Sterling – UK Markets

The Pound closed yesterday’s trading session nearly unchanged from Friday’s level against the US Dollar as lack of domestic economic data and persistent Ukrainian concerns continued to weigh on the currency pair. With little of note on the domestic macro front even today, investors will track a speech by the BoE Governor, Mark Carney, for any hints about the central bank’s policy stance going forward. Additionally, investors will follow global economic cues and events unfolding in Ukraine, especially after the US and the EU imposed sanctions on Russia following the latter’s recognition of Crimea’s independence. Meanwhile, Sterling has weakened against its peers this morning. Market participants are looking forward to tomorrow’s Budget Speech by the UK Chancellor, George Osborne. Against the backdrop of the Chancellor’s latest announcement to extend the “Help to Buy” scheme for another four years, expectations of additional incentives, especially to the exports industry cannot be ruled out. However, with the British economic recovery gaining traction over the past year, the Budget is unlikely to offer any major surprises on the fiscal front. Additionally, the latest BoE monetary policy meeting minutes and labour market data will gain market interest tomorrow.

US Dollar – US Markets

The US Dollar traded on a weaker footing against the common currency yesterday despite the release of upbeat domestic industrial production report which showed that output in the nation rebounded more than forecast for February. The positive industrial output numbers highlighted that economic recovery in the world’s largest economy is beginning to gain steam, shrugging-off the winter induced slowdown of the last two months. Manufacturing output for February also registered the biggest gain since August 2013. Meanwhile, the greenback has moved marginally higher against the Euro in today’s trading session. The domestic consumer price inflation report will be keenly followed by investors today to gauge inflationary pressures on the economy, especially following last week’s downbeat producer prices report. Furthermore, important US housing market data and latest updates from Eastern Europe following Crimea’s declaration of independence yesterday will also be on investors’ radar today. Looking ahead, tomorrow’s Fed monetary policy meeting outcome will provide cues to market participants about the central bank’s policy stance under its new Chief going forward.

Euro – European Markets

Yesterday’s final reading of the Euro zone consumer price inflation report surprised markets on the downside as inflationary pressures in the region eased unexpectedly for February, heightening speculation of deflation in the currency bloc. Although the ECB has consistently rebuffed deflation talks of late, the latest inflation numbers are likely to add to the central bank’s woes and might compel Mario Draghi to undertake further measures to support the region’s fragile economic recovery. Despite the soft domestic economic data, the single currency moved higher against its peers yesterday. Meanwhile, the common currency is trading marginally lower against the US Dollar in today’s trading session as investors continue to exhibit caution in the wake of mounting concerns in Eastern Europe. Later today, investors in the Euro-US Dollar pair will keep a tab on the forward looking German and Euro zone ZEW sentiment indices and important US economic data including consumer price inflation and housing market numbers for further direction to risk appetite.

Other Currencies – Highlights

The Australian Dollar is trading on a weaker footing against most of its major counterparts in today’s trading session after the Reserve Bank of Australia’s latest monetary policy meeting minutes released this morning highlighted the central bank’s concern about the high level of the domestic currency. The minutes also revealed that interest rates are likely to remain stable at current low levels in the near term if the economy continues to improve. The RBA also noted that while non-mining investment in Australia continues to remain subdued, it is expected to pick-up gradually, thereby boosting the nation’s economic recovery as it moves away from a prolonged mining-linked growth. With little of note on the domestic economic calendar to trigger risk appetite today, investors in the Aussie Dollar will keep a tab on news flows emanating from both sides of the Atlantic for further direction. Additionally, the Fed’s monetary policy meeting outcome tomorrow will sway investors’ trading sentiment in the Australian Dollar against its US counterpart in the near term.