UK Public Borrowings Rise

The UK public finances report just released has indicated a rise in government borrowings for February. With the UK Chancellor extending the “Help to Buy” scheme and offering a few more freebies earlier in the week, the government’s finances are likely to stretch further in the coming months. A barrage of domestic macro data scheduled next week will give further insights about the strength of the UK economic recovery. Across the Atlantic, Fitch affirmed its “AAA” credit rating with a “Stable” outlook for the US. Against the backdrop of the Fed Chief’s unexpected comments, speeches by influential policymakers today will be watched to ascertain their views about the same. In the Euro zone, consumer confidence data will gain market interest today.

Pound Sterling – UK Markets

The Pound weakened against the US Dollar yesterday as markets continued to remain influenced by the US Fed Chief, Janet Yellen’s comments about a possible hike in interest rates in a year’s time. Further, the relatively light domestic economic calendar did little to lift investors’ sentiment towards Sterling yesterday. While the CBI industrial orders survey report showed that the UK factory orders rose higher than expected for March, export orders fell sharply for the month, underlining the challenges faced by the nation’s export sector lately. Meanwhile, MPC policymaker, Martin Weale, opined that the amount of slack in the UK economy may be less than what the BoE estimated last month and that the nation might run out of spare capacity sooner than most central bank officials expect. Meanwhile, Sterling is trading in a tight range against the majors this morning. The domestic public finances report just out has shown that government borrowings climbed for February, though less than expected. With no more domestic economic data today, speeches by Fed policymakers will sway market sentiment. Moving forward, a raft of domestic economic reports will keep investors on their toes next week.

US Dollar – US Markets

The greenback climbed to its highest level in two weeks against the Euro yesterday, extending its Wednesday’s gains, after the US Fed Chief, Janet Yellen, outlined a schedule that interest rate hikes might take place around six months after the central bank wraps up its asset purchases programme. Additionally, better than anticipated initial jobless claims figures for last week provided relief to the Fed after it scrapped the unemployment rate threshold linked to the monetary policy. The Philadelphia area manufacturing activity also rebounded for March, suggesting that the impact of severe winter weather on the domestic economy might be receding. However, existing home sales dropped for February to its lowest level since July 2012. Today, the US Dollar is trading on a weaker footing, albeit in tight range, against its major peers. Meanwhile, Fitch affirmed its “AAA” credit rating on the US, with a “Stable” outlook. With no major macroeconomic data scheduled for today, speeches from some US Fed officials will be eyed to ascertain their views over the central bank’s monetary policy stance announced earlier this week. Additionally, news flows emanating from Russia could prove decisive for market sentiment.

Euro – European Markets

The Euro extended its losses against the greenback in yesterday’s trading session after the US central bank further reduced the pace of its monthly monetary stimulus and hinted at a sooner than expected hike in interest rates. Additionally, mostly encouraging US macroeconomic data further pressured the Euro against the US Dollar. Meanwhile, the European Commission President indicated that the two-day summit should focus on boosting the Ukrainian economy rather than imposing additional sanctions on Russia. However, the German Chancellor, Angela Merkel, hinted that the EU might impose additional sanctions in the form of asset freezes and travel bans. Separately, the EU is reportedly working on a €1.6 billion economic aid plan for Ukraine. Meanwhile, the Euro is range bound against the greenback this morning. Going forward, today’s Euro zone consumer confidence report is likely to show an improvement in consumer morale for March, suggesting that economic growth is gaining momentum. In the forthcoming week, the preliminary readings of manufacturing activity across Europe and German sentiment indices will keep investors interested to ascertain the pace of growth in the region.

Other Currencies – Highlights

The Swiss Franc failed to arrest its downward movement against the US Dollar after the Swiss National Bank decided to maintain status quo with regards to monetary policy in its meeting held yesterday. Additionally, the SNB reinforced its cap on the Swiss Franc, in force since September 2011, citing that the currency remains strong and risks to global economic recovery continue to persist, while also opining that it will take further steps if needed to support the cap on the currency. Furthermore, the central bank lowered its inflation outlook for the nation, projecting that prices will stagnate for 2014 before climbing 0.2% for 2015. The Swiss Franc had earlier weakened against the greenback after the US Fed hinted at raising interest rates sooner than expected. With little in terms of domestic economic releases today and next week, investors in the Swiss Franc will keep a tab global news flows for further direction to risk appetite.