Light Macro Calendar Today
In the absence of any notable macro triggers in the UK today, Sterling investors are likely to remain on the side lines ahead of UK manufacturing production data for January in Britain and the NIESR GDP forecast for the three months ended February due later this week. Meanwhile, the ECB is set to begin its asset purchase programme today wherein the central bank will buy €60 billion worth of bonds a month. Moreover, the just out Sentix report in the Euro zone revealed that confidence among consumers in the region improved for March.
Across the Atlantic, Friday’s labour market report revealed that job growth for February was robust, although domestic wages grew at a slower than anticipated pace last month.
Pound Sterling – UK Markets
In Friday’s trading session, a report revealed that the BoE downgraded its inflation forecast for the next twelve months in the UK, to its lowest level in the last thirteen years. This downgrade was consistent with Mark Carney’s recent comments which hinted at a temporary weakness in Britain’s inflation. Going forward, market participants will eye the nation’s core inflation for any signs of a downside, especially amid prospects that the current low oil price might broaden its impact on domestic consumer price growth going forward.
With little on the domestic macroeconomic front today, Sterling is trading on a firmer footing against the greenback this morning. Moving ahead, this week’s industrial production data in the UK will be eyed to gauge the health of domestic conditions for January, especially considering that manufacturing PMI readings in the UK have been showing upward surprises lately. Furthermore, Sterling traders will keep a tab on the NIESR GDP estimate in the UK later this week to gain an insight into Britain’s overall economic health for the three months ended February.
US Dollar – US Markets
The US Dollar strengthened against most of its peers on Friday, following the release of a robust job market report. Figures released by the US Labour Department showed that job additions in February surpassed market expectations. In addition, February’s unemployment rate in the US sunk to its lowest level since May 2008. However, wage growth missed estimates with growth in average hourly earnings falling below market expectations for February and slower than January’s figure which revealed the biggest increase in wages since March 2008. With official figures confirming a sharp improvement in the labour market, it remains to be seen if the Fed embraces tighter policy measures any time soon. However, tepid wage growth could prompt FOMC members to embrace a cautious approach. Meanwhile, the US trade deficit narrowed for January as both exports and imports fell.
The greenback is trading mostly lower this morning following the gains on Friday. The US retail sales data due for release later this week will be eyed for further cues on the state of affairs in the economy.
Euro – European Markets
The Euro is trading higher against the majors this morning. The Euro area finance ministers are expected to begin a discussion on Greece’s recently pledged reforms later today. Meanwhile, the Greek Finance Minister over the weekend signaled that the government could call for fresh elections, or hold a referendum, if European finance ministers reject its reform proposals. The ECB on the other hand is scheduled to start buying bonds from today and this programme is expected to last for a minimum of 18 months. On the macro front, the just released trade data from Germany showed surplus narrowing more than market expectations for January, amid a drop in exports.
The Euro slipped below the 1.10 mark against the US Dollar on Friday, as traders flocked towards the greenback following the release of a robust US labour report. Meanwhile, data on Friday showed that German industrial output rose more than expected for January, suggesting that economic growth in Germany is on a strong footing. Additionally, the final GDP reading in the Euro zone showed a modest pickup in the final quarter of last year.
Other Currencies – Highlights
The Japanese Yen is trading almost flat against the US Dollar, despite a broad weakness in the greenback this morning. This follows a slower than expected growth in Japan’s economy for the fourth quarter of 2014. The print indicated that a rise in consumer spending is not encouraging business to raise capital expenditure. The recent downbeat economic data releases from Japan may push BoJ Governor, Haruhiko Kuroda, to adopt a more dovish tone at the March 17 meeting and the central bank may further expand its QE programmed to meet its inflation goal.
Meanwhile, the BoJ Deputy Governor, Hiroshi Nakaso, in response to concerns about the impact of low oil prices on inflation in the nation, stated that further monetary easing is likely only if the oil price fall affects long-term inflation expectations and makes it difficult to reach the 2% inflation target.