Greenback rate to swing as CPI data release and FOMC minutes approach
What’s been happening?
UK: BoE member McCafferty lifted the pound yesterday by stating that the Old Lady of Threadneedle Street must not delay its next interest rate rise. A poll from investors suggested yesterday that there is now an 87% chance of a rate rise in May.
EU: The market awaits Draghi speaking today and ECB minutes tomorrow. ECB policy member Nowotny has already mentioned that there should be an end in their QE policy now which is ahead of the planned September date. If Draghi agrees with his fellow ECB member you will see the euro gain on the back of these comments. This would give the euro some much needed relief as it has been on the backfoot amidst poor economic data from the region of late.
US: It is all about the US CPI figure today. The expectation is a printing of 2.1% and comes ahead of important information later this evening in the form of FOMC meeting minutes. A CPI figure in line with expectation could spur a dollar rally given the four-rate hike expectation is based on inflation falling in line with their 2% inflation target figure.
What’s coming up?
UK: There is very little data out of the UK this week but the most noticeable of data out today came in the form of Industrial Production which edged up 0.1% MoM in Feb. Manufacturing also rose to 2.5% for the month of Feb for the YoY figure. The concern for the UK currently is imports of goods and services that fell by 4.8% to GBP 53.41 billion in Feb from the previous month’s record high of GBP 56.11 billion. The drop off was attributed to a decrease in purchases of goods, led by fuel and manufactured goods.
EU: We had ECB’s Nowotny speaking yesterday who largely supported the euro by backing QE to end now. Following the comments, the euro gained against the pound and the dollar advancing for the third consecutive session against the dollar coming off its lows of last week. this morning. However, the euro is still susceptible to weakness given poor data of late and has been sold ahead of Mario Draghi’s speech due this afternoon. If Draghi does not share the views of Mr. Nowotny, we could well see the euro give up more ground.
US: The big data out of the US today will be CPI and FOMC minutes. FOMC minutes will be revealed at 6pm and will hold vital information relating to March’s monetary policy meeting. This could be a market mover for the greenback as the minutes certainly hold clout giving clues to interest rate discussions and the Fed’s potential direction. Markets are expecting four hikes form the Fed and hinges on their inflation target figure of 2%. If CPI comes out as expected, we could see a dollar positive move.
President Xi, speaking at the Boao Forum for Asia, gave the Aussie a much needed lift against the dollar. President Xi gave the market some confidence and eased tension regarding the ongoing trade war concerns between China and the US. He mentioned that his government remain committed to free trade and will consider cutting certain tariffs.