Light Economic Calendar Day in the UK and the US
After quite a show overnight, when the Bank of England (BoE) held rates as expected with a unanimous 9-0 vote, the Pound is back to end the trading week on a weaker note today. The UK docket is empty of any significant macroeconomic releases. Across the Atlantic, the consumer sentiment gauge tracked by the Reuters/Michigan index is the only data scheduled in the US today. For market participants, the spotlight is on three speakers from the US Federal Reserve (Fed) as they speak for the first time after the Federal Open Market Committee (FOMC) meeting earlier this week.
In Europe, earlier today, data showed that German producer prices fell at a faster than expected pace in February as energy prices continued to exert downward pressure.
Pound Sterling – UK Markets
The Pound briefly surged above the 1.45 mark against the greenback yesterday, given the broad based weakness in the US Dollar and not so dovish BoE. The nine-member monetary policy committee, led by the BoE Governor, Mark Carney, unanimously agreed to hold the interest rates unchanged, at its record-low level since 2009. The decision came in the wake of weak inflationary pressures, slowing economic growth and growing concerns that the UK will vote to exit the European Union on 23 June. However, the central bank still called for a gradual rate rise in the next three years. The BoE Governor had earlier stated that the bank is equipped with enough ammunition to help the economy if it is needed, but he ruled out following in the footsteps of other central banks to adopt negative interest rates.
The Pound has retreated against the US Dollar this morning, amid no major economic releases scheduled for release in the UK today. Looking forward to next week, investors’ attention will shift towards the very important inflation and retail sales data for more insights into the state of the UK economy in the first quarter.
US Dollar – US Markets
The US Dollar has partly recovered from its earlier losses against most of the major currencies this morning. With the FOMC meeting now behind, three voting members of the rate setting committee are the first to speak today after the crucial policy meeting earlier this week, and their views regarding monetary policy will be closely monitored for further clarification on the Fed's thinking. On the data space, today’s US economic calendar is a bit light, with only the Michigan University’s preliminary consumer confidence index scheduled for release later in the day. Expectations are for the index in March to remain at the high levels seen since January 2015, suggesting that consumers are still optimistic about the health of the economy, despite signs of a weaker global economy and turbulence in financial markets witnessed at the start of the year.
Yesterday, the greenback traded at multi-month lows against the Euro despite the release of positive US economic data. Applications for first-time unemployment benefits in the US rose last week, but remained at levels consistent with a healthy job market.
Euro – European Markets
The shared currency pared its previous session gains against the US Dollar earlier today. However, the Euro - US Dollar currency pair was little changed after data showed that German producer prices fell more than expected in February, as weaker energy prices continued to weigh on the index. On an annual basis, the German producer price index has been falling since August 2013. The less than impressive inflation data is a matter of serious concern for Europe’s largest and strongest economy and its effects could spread across the continent. Later, the currency pair dipped below the 1.13 mark after the European Central Bank’s chief economist, Peter Praet, stated that there is still room to cut interest rates should the Euro zone’s economic recovery falter.
Going forward, it is going to be a light calendar week in Europe, with only the ZEW survey report on economic sentiment in the Euro zone and Germany, as well as a string of manufacturing and services PMI scheduled for release.
Other Currencies – Highlights
The Canadian Dollar has trimmed some of its earlier gains against the US Dollar today as the greenback is on a broad based recovery momentum across the board. The US Dollar – Canadian Dollar currency pair has backed away from a near five-month trough as traders seemed to have moved past the recent dovish Fed’s policy statement and now looks ahead to a set of macro print from their respective economies for further trading direction. Meanwhile, gains in the currency pair are limited as a recent rally in oil prices, after the major oil producers floated the idea of a production freeze, supports the commodity currencies, such as the Canadian Dollar.
On the Canadian data front, inflation numbers and retail sales data are scheduled for release later today. Expectations are for inflation prices to rise in February from the previous month, while the annual pace of inflation markedly slows. Separately, the nation’s retail sales growth is anticipated to bounce back in January for both the base figure and the variant excluding automobile sales.