What’s been happening?

UK: CPI came out this morning printing a lower than expected figure of 2.5% versus 2.7%. As a result, the pound was sold lower against both the dollar and the euro. The CPI figure is heavily linked with interest rates and with the expectation of a rate hike next month, the question is, will this figure now reduce the chance of rates rising in May? Has the pound momentum finally come to a grinding halt? 

EU: European stocks are trading higher this morning following gains on Wall Street and Asian markets. If you look at the performance of the euro against the dollar since the start of the year it still boasts a 3.5% gain. However, data out of the eurozone has been poor of late and with German figures cooling too, we can expect the euro to weaken if their inflation figures miss the expected 1.4% today.

US: It appears that investors alike are reluctant to back and buy the dollar at present. Even with the reversal of some safe haven buying, this has done little for the greenback, with investors shying away from the tradition of dollar safety and diversifying into other currencies. A gauge of bank earnings will be released for Q1 this week. Good figures will help equity markets which could signal further dollar weakness. 

What’s coming up?

UK: Other than the release of the UK CPI figure this morning it is very quiet in terms of data today. Tomorrow we are preparing for Retail Sales figures, both MoM and YoY, with no real market moving data due out from the UK until Friday 27th, when Q1 GDP will be released.

US: The Fed Reserve will release the Beige Book findings this afternoon. This is produced eight times per year by the Fed and will provide information on current economic conditions. We also have FOMC member Dudley speaking later this evening, markets will listen closely to see if any hints are provided in relation to his views on future interest rate decisions.

EU: We have Construction Output CPI figures out of Europe today, as well as the Current Account for Feb released tomorrow.

RoW

The Australian dollar was weaker against most currencies yesterday, as the RBA delivered a cautionary note regarding interest rates, inflation and wage growth. They mentioned that inflation and wage growth are unlikely to rise in the next 12 months, which has now reduced any expectation of an interest rate rise until 2019. Closely linked to Aussie economy are the effects of China and its data. Although growth figures fell in line with expectation, their industrial production fell, which also dragged AUD lower. Today will also see the release of the Bank of Canada’s interest rate decision. Broadly speaking there is no expectation for rates to move from the current 1.25%, the market supports this view with only a 20% chance.