UK Consumer Price Inflation Eases

With the just out domestic inflation numbers highlighting easing inflationary pressures in the nation, the BoE is unlikely to contemplate altering its policy stance in the near term. Additionally, the disappointing mortgage approvals report is likely to keep a tight lid on market speculation of a possible housing bubble in Britain. Across the Atlantic, mixed economic reports and conflicting comments made by Fed policymakers continue to confound investors about the strength of the economy and the central bank’s policy stance going forward. In the Euro zone, further signs of the recent geopolitical tension affecting the region’s economy emerged following the release of downbeat German Ifo business sentiment report earlier today.

Pound Sterling – UK Markets

The Pound has moved marginally higher against the Euro in today’s trading session. Data just released showed that consumer price inflation in the nation continued to ease for February. The persistent easing trend in UK consumer prices over the past few months has further lessened the possibility of the BoE raising its benchmark interest rates in the near future. Additionally, producer prices also mellowed down for the month, highlighting the overall subdued inflationary pressures on the economy. Additionally, the domestic housing market showed a slight moderation in activity as mortgage approvals unexpectedly dropped for February. Later today, the UK CBI retail trades survey report will attract modest market attention in order to gauge the overall consumer sentiment in the midst of easing price pressures. Additionally, investors in the Pound-US Dollar pair will keep a tab on a raft of US economic data today for further direction to risk appetite. With a light domestic economic calendar yesterday, Sterling was volatile against the greenback, failing to capitalise on increased risk appetite in markets amid signs of receding tensions in Ukraine and weaker than expected US economic data.

US Dollar – US Markets

Although the impact of weak manufacturing PMI data from the US was initially subdued, the US Dollar witnessed a delayed reaction to the disappointing economic data, as traders speculated that the Fed might adopt a loose monetary policy stance for a prolonged period. The US Dollar began the week on a firm footing against the single currency following disappointing Euro zone and German PMI data. However, the upward momentum proved short lived following the weak domestic manufacturing print. Although the Fed Chief appears to have raised the prospects of the Fed raising interest rates sooner than expected, John Williams, the San Francisco Fed President, offered a slightly contrasting view by indicating that the central bank is unlikely to raise interest rates until the second half of 2015. Meanwhile, the greenback is range bound against its major peers in today’s trading session. Against the backdrop of weak housing sector data released last week, today’s new home sales and house price indices are likely to echo a similar trend. Also, investors will keep a tab on domestic consumer confidence data due later in the session which might show a marginal improvement for March.

Euro – European Markets

The Euro traded under pressure against most of its major counterparts in early trading session yesterday following the release of weak German manufacturing and services PMI reports and dismal Euro zone services PMI print. The downbeat German PMI numbers revealed a slowdown for March, thus indicating that economic recovery in the Euro bloc’s largest economy continues to remain fragile. However, the single currency advanced against its major counterparts later in the day amid speculation that the Russian standoff in Ukraine might unfold without military involvement. Meanwhile, the common currency has failed to move higher against the US Dollar this morning as data released earlier today revealed that the Ifo business confidence index in Germany fell to a two-month low for March. The latest German business sentiment report coupled with last week’s disappointing ZEW sentiment indices suggest that economic recovery in Germany continues to remain uneven. Meanwhile, investors in the Euro-US Dollar pair will keep a close watch on a speech by the ECB President, Mario Draghi today along with macroeconomic data in the US.

Other Currencies – Highlights

The Japanese Yen has held on to its yesterday’s gains and is trading higher, albeit in a tight range, against the US Dollar in today’s trading session as investors keenly await the outcome of the G7 meeting. With G7 nations warning Russia of damaging economic sanctions if the Ukrainian crisis escalates further, market participants continue to closely monitor events unfolding in Eastern Europe. In a relatively subdued trading session yesterday, the Japanese Yen strengthened against the greenback tracking the weak US manufacturing PMI report. Meanwhile, the BoJ Deputy Governor, Kikuo Iwata, warned that consistently low inflation below 1% might increase the risk of deflation in the nation. With little on note on the domestic economic front today, investors in the Japanese Yen will keep a tab on global economic data and latest updates in Ukraine for further direction. Additionally, a slew of domestic macro releases later this week will prove crucial for the Japanese Yen against the majors in the near term.