Mark Carney’s Testimony on Radar
The BoE Governor, Mark Carney, along with some other key policymakers will testify before the Parliament’s Treasury Committee today where they are anticipated to shed some light on the central bank’s policy stance going forward. Although the testimony is unlikely to offer any fresh insight into the timing of an interest rate rise in the UK, any update regarding Britain’s labour market health is likely to attract significant attention among market participants.
In the latter half of the trading session, speeches by the ECB President, Mario Draghi, and the US Fed Chief, Janet Yellen, are key macro events that will keep market participants interested today. Additionally, the Conference Board’s survey across the Atlantic will be eyed today to gauge the morale among domestic consumers for February.
Pound Sterling – UK Markets
With little on the domestic macroeconomic front, the Pound is trading in a tight range against the greenback this morning ahead of the BoE Governor’s testimony to the common treasury committee. Mark Carney is unlikely to offer any major surprise to traders over the timing of an interest rate rise in the UK, especially after he recently hinted that the central bank is on course to raise interest rates early next year. However, his testimony along with comments by other key central bank officials will be eyed to gain an insight into the nation’s spare labour capacity, particularly considering that strong labour market dynamics have played a key role, of late, in offsetting the impact of weak inflation in the UK. Furthermore, the testimony of the US Fed Chief, Janet Yellen, before the Congress will attract significant attention among investors in the Pound-US Dollar pair in the latter half of today’s trading session.
Yesterday, the Pound remained broadly range bound against the majors. The CBI distributive trends survey showed that retail sales in the UK witnessed a more than expected fall back for February.
US Dollar – US Markets
The US Dollar traded lower against the single currency yesterday. Economic releases in the US started the week on a sour note, with existing home sales slipping below expectations for January. This follows last week’s disappointing data which showed a drop in housing starts for January. Permits for future home building also declined. In light of these recent releases, new home sales due later this week will be keenly watched for further insights into the state of the housing market.
The greenback is trading higher against the Japanese Yen and has slipped marginally against the Euro and Sterling, ahead of Fed Chairperson, Janet Yellen’s remarks on the economy and monetary policy later today. Investors expect Yellen to signal that rates would remain near zero in the near term considering that the latest housing and manufacturing reports support the need for patience. Yet, considering the robust labour market indicators recently, traders would closely eye her remarks to decipher whether her message has a hawkish or a dovish tone. Investors would also keep a tab on the consumer confidence data in the US due today for further direction.
Euro – European Markets
After missing the Monday deadline, Greece this morning released a string of reforms, containing measures to combat tax evasion and curb corruption. Greece’s creditors will review the proposal today before giving their approval for extension on funding. As headlines from Greece continue to remain in spotlight, market participants will also keep a tab on the final CPI figures in the Euro area for January and the speech by the ECB’s President Mario Draghi, scheduled today for further direction. The single currency traded lower and briefly slipped below the 1.13 mark against the US Dollar in yesterday’s trading session. The Euro was weighed down by a smaller than expected increase in the German business confidence, as measured by the Ifo.
The Euro is trading in a tight range against the major currencies this morning. The just out GDP figures in Germany for the final quarter of last year came in line with the preliminary print and was led by an increase in external demand.
Other Currencies – Highlights
The New Zealand Dollar traded lower against the greenback after the nation’s central bank released its report on inflation expectations for the first quarter of the new year. The New Zealand Dollar reversed its earlier gains against the US Dollar this morning after the Reserve Bank of New Zealand lowered its inflation outlook sharply, compared with the previous quarter’s forecast. This outlook could be a key basis for the course of monetary policy in the nation going forward in the nation. Meanwhile, investors remain cautious ahead of the US Federal Reserve Chairperson’s testimony later today for any hints on the timing of the US interest rate rise.
Moving ahead, market participants will keep a tab on New Zealand’s trade balance data for January scheduled tomorrow which is expected to show a further widening in deficit from the last month. The weakening outlook for global trade and lower inflation expectation may lead the Reserve Bank to reinforce its dovish stance which was expressed by the Governor last month when he had hinted at a possible future rate cut.