Crucial US Labour Market Report Awaited
In line with market expectations, the BoE kept its benchmark interest rate unchanged at its policy meeting yesterday. Additionally the central bank lowered its inflation forecast for the next twelve months. The downgrade was in line with the guidance provided by the BoE Chief, who had earlier indicated short term weakness in Britain’s inflation.
The Euro slumped against most of its peers in the aftermath of yesterday’s ECB monetary policy meeting. Across the Atlantic, today’s official labour market report is anticipated to hog limelight in the latter half of today’s trading session. The print is anticipated to show that job growth in the US remained robust and unemployment rate in the nation nudged lower for February.
Pound Sterling – UK Markets
In yesterday’s trading session, the Pound remained range bound against the greenback. The Halifax report released yesterday revealed that on a monthly basis, house prices in the UK dropped more than expected for February and registered its first fall since October 2014. Renewed signs of cooling in Britain’s real estate segment is likely to raise doubts about this sector’s performance, particularly considering that activity in the housing segment, of late, has remained buoyed by strong growth in real income and low mortgage rates. Separately, the BoE in its policy meeting yesterday, kept its key interest rate unchanged at 0.5% and maintained its asset purchase facility at £375 billion.
Data just out has shown that the BoE lowered its inflation forecast for the next twelve months. The downgrade was in line with the central bank Chief, Mark Carney’s guidance of a temporary weakness in Britain’s inflation. Going forward, the NIESR’s GDP forecast for the three months ended February and the BoE’s economic bulletin for the first quarter of 2015 will be some key macro prints in the UK next week.
US Dollar – US Markets
The greenback is trading close to yesterday’s highs against its major peers, ahead of the US nonfarm payrolls report for February, scheduled later today. Today’s job market report will be of key importance, with the March FOMC meeting fast approaching. US payrolls are forecasted to grow by more than 200K for February, but less than last month. Meanwhile, the unemployment rate is expected to nudge lower. Separately, growth in wages will be watched to get a clearer picture about wage spending among firms in the midst of a benign inflation environment and after having risen sharply last month.
The US Dollar firmed against the single currency yesterday, after the ECB announced that its asset purchase programme would begin next week. Meanwhile, factory orders in the US fell for a sixth-straight month for January. Separately, unemployment claims in the nation rose more than expectations last week, but the increase could be weather related. For the week ahead, retail sales data from the US will be watched in order to decipher the trend in consumer spending amid weaker energy prices and improving labour market indicators.
Euro – European Markets
The Euro was dragged down to a multi-year low against the greenback after the ECB President unveiled details about the quantitative easing programme which will begin from next week. The ECB would buy €60 billion worth of bonds per month until September 2016. Initially, the Euro had edged higher against the majors after the ECB raised its GDP forecast for 2015 and 2016. The President later admitted that the ECB’s QE programme could be extended beyond September 2016, if it fails to help reach the inflation target of around 2% by then.
The Euro is trading lower against the majors and is marginally above the 1.10 mark against the US Dollar this morning, as ECB President’s comments continued to weigh on the single currency. Meanwhile, data just released showed that industrial production in Germany firmed higher than market expectations for January. This is in contrast with yesterday’s factory orders data which had declined during the same period. For the day ahead, official labour market data from the US will be eyed for further direction.
Other Currencies – Highlights
The Canadian Dollar traded lower against the greenback yesterday, erasing its earlier session gains. In data released yesterday, Canada’s Ivey PMI continued to remain in contractionary territory, fuelling concerns over the nation’s economic outlook. Moreover, a recovery in oil prices provided little support to the Canadian Dollar. Earlier in the week, the Canadian Dollar had strengthened following the Bank of Canada’s indication that it would avoid a rate cut in the next meeting as well, as the degree of monetary policy stimulus seemed sufficient as of now.
The Canadian Dollar is trading in a tight range against the US Dollar this morning, as focus shifts towards a string of macro releases in Canada before the key US labour market report today. Canada’s merchandise trade data for January is scheduled to be released today and is expected to show a wider deficit for January. Additionally, building permits data from Canada, which is also up for release today, is anticipated to have sharply declined for January. The recent downbeat macro releases from the nation are likely to have an impact on Central Bank’s current stance to keep the rates steady.