ECB's Policy Decision and Statement Awaited
Today, focus will likely be on the Euro as the European Central Bank’s (ECB) 25-member governing council meets later today to discuss its monetary policy. The ECB is unlikely to announce an expansion of its quantitative easing programme. Instead, expectations are for the President to reiterate his willingness to act again down the road if plunging oil prices weigh on the bank’s efforts to push inflation higher in the 19-nation Euro zone.
Britain’s house prices ticked up in line with expectations for December, the latest survey from the Royal Institution of Chartered Surveyors (RICS) showed earlier today. Later in the day, two data prints are scheduled for release in the US, including initial jobless claims and the Philadelphia Federal Reserve’s manufacturing index.
Pound Sterling – UK Markets
Earlier today, a survey by the RICS showed that UK house price growth picked up last month amid continued property supply constraints in the market. Moreover, prices were driven up with increased activity in the buy-to-let market, as buyers sought out properties before the increased stamp duty levy announced by the UK Chancellor last year which will come into force in April. In a sign that the nation’s housing market will continue to heat up further over the next few months, a measure of price expectations jumped to its highest level since 2014.
This morning, the Pound – US Dollar currency pair is trading just below the 1.42 mark. The pair continues to remain pressured but the downside looks limited as recent mixed employment data in the UK offered some support to Sterling traders. Moreover, soft inflation data in the US yesterday has slightly dampened the attractiveness of the greenback. As no further key events are scheduled in the UK today, focus will continue to remain on broader market sentiment and global economic releases for further direction in the pair.
US Dollar – US Markets
The US Dollar traded on a weaker footing against most of the major currencies yesterday after data showed that consumer price inflation (CPI) in the US rose less than expected for December, as the cost of energy products and food declined. Separately, a drop in housing starts and building permits in December, in combination with previous soft numbers on retail sales, industrial production, exports, inventory and manufacturing surveys, have raised concerns about the health of the US economy. With data turning increasingly negative, it will be interesting to see the stance by the US Fed on interest rates in its next meeting.
The greenback has edged higher against its major currency counterparts this morning, ahead of jobs data in the US that will reveal the number of applications for first-time unemployment benefits last week, with market expecting a decline. Separately, manufacturing data in the survey published by the Federal Reserve Bank of Philadelphia is anticipated to offer a comparatively bright update, albeit in the form of a mild easing in the contraction for January.
Euro – European Markets
The shared currency has partly recovered from its earlier losses against the Pound this morning, with the currency pair currently hovering close to the 0.77 mark.
Looking ahead, market participants await the upcoming European Central Bank (ECB) monetary policy meeting and the subsequent press conference by the President, Mario Draghi, for further direction. Although the central bank is not anticipated to announce any new policy measures at its first meeting of the year, it will likely keep the door open for further easing in the future in the face of the latest financial market turmoil. Since the December ECB policy meeting, when the central bank had roiled markets by announcing a smaller than expected stimulus, the global outlook has deteriorated following a slump in commodity prices and jitters surrounding China’s economy. Despite the headwinds, the Euro zone recovery appears to be broadly on course, according to recent economic numbers. As a result, markets will be looking out for the tone at today’s ECB press conference to assess the current macroeconomic picture of the economy.
Other Currencies – Highlights
The Aussie Dollar is currently trading in a close range against the US Dollar. Earlier today, the Aussie Dollar had trimmed part of its previous day’s gains against the greenback, amid a continued drop in oil prices. Also, a report by the Housing Industry Association that indicated a fall in new homes sales in Australia for the third consecutive month in November pressured the Aussie currency. Data attributed the decline in home sales to slowing population growth, higher mortgage costs, and easing property price growth in Sydney and Melbourne. Additionally, a survey by the Melbourne Institute showed that inflationary expectations in Australia declined in January ahead of consumer price inflation (CPI) data scheduled to release next week. This follows the widely watched Westpac-Melbourne Institute Index earlier this week, which indicated that consumer confidence in Australia sharply dropped for January.
The Australian Dollar traded high against the US Dollar yesterday after downbeat CPI and housing data in the US fuelled concerns about the health of the economy.