House Prices Continue to Rise

Notwithstanding the just out weak domestic mortgage approvals report, the UK housing market continues to remain strong, with house prices rising for the fourteenth consecutive month for March. With the government extending its supportive housing market programme earlier this month, the sector is likely see further growth in the future. In the Euro zone, Friday’s weaker than forecast German consumer prices report is likely to weigh on today’s Euro zone inflation numbers and with ECB policymakers hinting at using further policy measures, the ECB monetary policy meeting this week will be a closely followed event. Across the Atlantic, Janet Yellen’s first speech following the FOMC meeting earlier this month will be scrutinised by market participants for gauging the timing for an interest rate hike in the US.

Pound Sterling – UK Markets

Despite Friday’s domestic final fourth quarter GDP report offering little surprises, the Pound moved higher against the majors tracking weaker than expected US and Euro zone macroeconomic data. The 2.7% annual British growth rate during the final quarter of the last year, with the services sector emerging as the biggest contributor, confirmed the nation’s steady economic recovery in 2013. However, higher than expected domestic current account deficit for the quarter and a slight downward revision of overall economic growth for 2013 dampened investors’ sentiment. Meanwhile, Sterling is trading under pressure this morning following the release of the UK housing market report this morning which showed that mortgage approvals eased for February, while consumer credit remained largely stagnant for the month. With no more domestic economic releases on tap in the session ahead, Sterling investors will closely follow the Euro zone consumer price inflation report together with a speech by the Fed Chief, Janet Yellen for further direction. The UK manufacturing and services PMI numbers scheduled for release this week will also keep Sterling investors interested.

US Dollar – US Markets

The US Dollar closed lower against the majors on Friday, following the release of the revised domestic Reuters/Michigan consumer sentiment report which showed that consumer confidence in the nation for March dropped to the lowest level in four months. However, the positive consumer income and spending numbers for February limited the greenback’s losses against the single currency. The marginally upbeat income and spending print has highlighted that the US economic growth is gaining a foothold following the temporary slowdown due to an unusual cold weather lately. Additionally, the downbeat German inflation numbers kept the greenback supported against the Euro. The US Dollar is searching for direction against its counterparts in today’s trading session. Going forward today, market participants will keep a close watch on the US Fed Chief, Janet Yellen’s speech. Additionally, today’s regional manufacturing activity numbers will also gain market attention ahead of tomorrow’s ISM manufacturing PMI report. Furthermore, the Euro zone consumer price inflation report will also drive trading sentiment in the US Dollar in the session ahead.

Euro – European Markets

The common currency closed nearly unchanged against the greenback on Friday despite the release of weak German and Spanish inflation reports. The German consumer prices eased more than expected, to their lowest level in more than three years, while Spanish inflation dropped at the fastest annual pace since October 2009 for March, thereby indicating that deflationary pressures continue to hamper the region’s economic recovery. Against this backdrop, today’s Euro zone inflation data, which is likely to show an annual easing for March, will be closely eyed by investors and might weigh on the Euro-US Dollar pair in the near term. In the wake of last week’s dovish comments by Mario Draghi and the subsequent weak German inflation numbers, it remains to be seen if the ECB resorts to using additional monetary policy measures in its meeting this week. Meanwhile, the single currency is range bound against the US Dollar this morning. Data released earlier today showed that German retail sales unexpectedly climbed for February. Apart from the Euro zone inflation print, investors will also keep a tab on the US Fed Chief, Janet Yellen’s speech for further direction.

Other Currencies – Highlights

The New Zealand Dollar has recouped most of its early session losses against the majors and is trading on a stronger footing against its peers this morning. The domestic business sentiment data released earlier today showed that confidence among businesses in the nation eased slightly for March, but continues to hover near a twenty-year high. The Kiwi Dollar has built on its upward trend against its counterparts over the past few weeks in the midst of an improved domestic economic environment and the Reserve Bank of New Zealand’s decision to raise interest rates earlier this month. With little on the domestic macro front to trigger investors’ risk appetite this week, crucial news flows emanating from both sides of the Atlantic will determine the Kiwi Dollar’s movement against the majors in the near term. Additionally, investors will keep a tab on crucial Chinese macro data this week for further direction.