BoE’s Monetary Policy Meeting in the Spotlight
The Bank of England’s (BoE) monetary policy meeting scheduled later in the day will attract most of the market attention amid increased concerns over the soon approaching UK's EU referendum. However, the UK central bank is more likely to stay put on its long-term record low interest rates despite a rise in the nation’s consumer prices last month. In Europe, investors will closely watch the final print of the Euro zone’s consumer prices data on an annual basis, which is anticipated to confirm its preliminary reading to show deflation for a second consecutive month. Earlier, data showed that consumer prices continued to decline in Italy on an annual basis in March.
Across the Atlantic, investors will eye US consumer prices and initial jobless claims prints, while comments from two key Federal Reserve (Fed) officials will also hog the limelight.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing against the major currencies this morning ahead of the BoE’s monetary policy meeting scheduled later in the day. The Monetary Policy Committee members are likely to vote unanimously to keep the benchmark interest rate unchanged at the level which it has maintained for almost seven years. Even as the annual UK inflation rose to a 15-month high in March, recent prints of services and manufacturing sectors indicated that the British economy witnessed sluggish growth. Against this backdrop, investors will be keen to see if policymakers loosen up the monetary policy to counter potential consequences of Britain’s exit from the European Union and sluggish growth. Rising concerns that UK nationals might vote to leave the European Union continued to weigh on the Pound.
Earlier today, a report by the Royal Institution of Chartered Surveyors showed that the gauge of UK house prices dropped more than anticipated to hit a nine-month low level in March. Going forward, investors will look forward to next week’s key economic releases in the UK for further direction.
US Dollar – US Markets
Yesterday, the US Dollar traded higher against its major peers in a risk-on environment, after the International Monetary Fund trimmed its global growth forecast, citing an extended period of slow growth. Moreover, a steady lineup of hawkish Fed speakers further supported the greenback. Adding to this, the US Fed, in its Beige Book report, painted an optimistic picture of the US economy, as it stated that 11 of its 12 regions reported wage growth during the period from late February to early April. On the data front, sales at US retailers surprisingly fell in March as households cut back on purchases of automobiles and other items. A separate report from the labour department showed that US wholesale prices declined for the second consecutive month in March, spelling further trouble for the nation’s manufacturing sector.
In the session ahead, market participants will look out for some relief from the US consumer price inflation data, scheduled later today. Investors will also pay attention to the weekly jobless claims data and speeches from Fed’s Dennis Lockhart and FOMC member Jerome Powell.
Euro – European Markets
The shared currency is trading on a weaker footing against the US Dollar but higher against the Pound this morning. Earlier data showed that consumer prices in the third largest economy of the Euro zone confirmed its preliminary reading to show a rise in March. However, this was the first time since November that consumer prices in Italy advanced. In the session ahead, investor focus will be on today’s final print of the Euro zone’s core consumer price index (CPI) which is anticipated to mirror its preliminary estimate. Even though consumer prices are expected increase in March, its annual CPI is likely to show a decline for a second straight month.
Yesterday, the Euro traded lower against the greenback and Sterling following the release of the Euro zone’s industrial production data which showed that production fell more than expected in February, largely due to a drop in output of non-durable goods such as clothes or food. Industrial production growth figures were downwardly revised in January.
Other Currencies – Highlights
The Aussie Dollar has regained lost momentum against its US counterpart this morning, following better than expected jobs data in Australia. The nation’s unemployment rate dropped in March, defying expectations for an increase, falling to its lowest level since September 2013. The economy added more than anticipated new jobs in March, as it snapped back from three consecutive months of decline. The upbeat jobs data is mostly likely to delay any rate increases by the Reserve Bank of Australia for now.
Going forward, today’s economic releases in the US and multiple speeches by key Fed officials will provide direction to the Australian Dollar - US Dollar currency pair. Along with consumer price inflation data which is anticipated to show an increase in prices for the first time since November 2015 and number of persons filing for first-time unemployment benefits in the US, investors will also look forward to speeches by two key Fed officials later today.