Mark Carney’s Speech Awaited
Data just out has shown that trade deficit in the UK narrowed for January as low crude oil prices kept the nation’s import bill in check. With no other notable macro triggers in the UK today, focus among Sterling investors is likely to shift on the BoE Governor’s speech scheduled later today, particularly after a key policymaker, Martin Weale, stated yesterday that the central bank might have to tighten its policy stance earlier-than-anticipated. In the Euro zone, traders will eye today’s industrial production report for the Euro area, for further direction.
Across the Atlantic, February’s retail sales report will attract significant attention among market participants, especially considering that this print is a key measure of consumer spending in the nation, an important growth driver of the US economy.
Pound Sterling – UK Markets
It was revealed this morning that the UK’s trade deficit narrowed more than was expected for January, as cheaper oil continued to offset the nation’s import bill. This bought some relief to investors, especially after Britain’s trade deficit had widened unexpectedly last month. The Pound is trading on a weaker footing against the Euro, while it is firmer against the greenback. Going forward, the BoE Governor’s speech scheduled later today will be eyed amid signs of disparity in policymakers’ view towards the timing of an interest rate rise in the UK, especially after a key central bank official, Martin Weale, hinted yesterday about prospects of a sooner-than-expected rise in rates.
The Pound dropped below the 1.50 mark against the greenback in yesterday’s trading session following the release of the downbeat industrial production report in the UK. The print showed that output among producers in the nation declined unexpectedly for January amid signs of weakness in the information technology and machinery sectors. Separately, the NIESR kept UK’s GDP growth forecast unchanged for the three months ended February.
US Dollar – US Markets
The US Dollar has lost ground against its major peers this morning, following sharp gains over the previous few sessions. Market participants await the release of US retail sales data for February, which is a barometer of consumer sentiment and is expected to show a rise over January. A positive surprise in the numbers could support the ongoing broad rally in the US Dollar, while a disappointing may add to this morning’s losses. Retail sales data has been soft in the past and growth has been negative for the last two months. Last month, retail sales had contracted more than market expectations, despite cheaper oil prices boosting consumer spending power. Markets will be keen to observe whether consumers decide to spend more or save. Today’s release will be given due consideration by markets since it is one of the few significant readings on economic activity prior to the next week’s FOMC meeting.
The greenback traded sharply higher against the major currencies yesterday, amid rising expectations of a near term interest rate rise by the US Federal Reserve.
Euro – European Markets
The Euro is trading higher against the greenback this morning. The just released data from Germany showed that consumer price rise was back in positive territory for February and in line with the preliminary estimates. Last month, the consumer price change had fallen into the negative zone largely driven by lower energy prices. The final consumer price reading from the Euro zone economies, including Spain and France, showed a similar rebound today. Markets now await Euro zone’s industrial production data for January, due for release later today. Recent releases on industrial production growth from the larger countries of the Euro area have been mixed and market expectations are for a modest pickup in output for the aggregate Euro area for January.
The Euro slumped against the greenback in yesterday’s trading session, falling below the 1.06 mark, days after the start of quantitative easing in the Euro zone. Meanwhile, the ECB President, Mario Draghi, in his speech yesterday expressed optimism about a revival in the Euro zone’s economy and backed the central bank's recent stimulus measures.
Other Currencies – Highlights
The New Zealand Dollar rebounded against the greenback after the Reserve Bank of New Zealand left interest rates on hold. The RBNZ reiterated its neutral policy stance, indicating that rates could move up or down depending on inflation expectations. Meanwhile, the central bank cut its GDP forecast for first quarter of 2015 and indicated that it expects annual inflation to fall to around zero in the March quarter and remain low over the year.
The RNBZ’s rate decision was followed by a press conference, where the central bank Governor, Graeme Wheeler, expressed confidence in the nation’s economy. He stated that the fall in inflation due to the drop in oil prices was a relative price effect which justifies possible stability in interest rates for an extended period. Meanwhile, the REINZ house price index soared more than market expectations for February, led by Auckland where an under supply of housing has put pressure on home prices.