Minutes of BoE’s Latest Policy Meeting Anticipated
In the absence of any major triggers on the domestic macroeconomic front, focus among Sterling investors is likely to remain on the minutes of BoE’s latest policy meeting scheduled for release tomorrow. Although the publication is not anticipated to show any changes in voting pattern among policy-setters, the minutes will be scrutinised for gauging the timing of an interest rate rise in the UK.
In the Euro zone, April’s ZEW survey is expected to show that morale among German investors improved for a fifth straight month, supporting confidence among financial market participants in the region. Across the Atlantic, tomorrow’s housing market surveys will attract significant attention to gain an insight into the nation’s real estate sector’s health for the first quarter of 2015.
Pound Sterling – UK Markets
With a complete absence of any major domestic economic data to influence trading, the Pound traded on a weaker footing against the US Dollar yesterday as political uncertainty ahead of the upcoming general election in the UK weighed on investor confidence. The Pound had strengthened against most of the major currencies last week, following Britain’s upbeat labour market data. However with the elections fast approaching, trading in Sterling is likely to witness volatility amid growing uncertainty, as opinion polls have failed to show a clear verdict.
The Pound has lost ground against the greenback this morning, amid no macro releases in Britain today. Going forward, market participants will keep a tab on the minutes of the most recent BoE monetary policy meeting, due tomorrow. In the last batch of minutes, policymakers had warned that the strength in the Pound was worsening the current deflationary climate. In the wake of positive macro indicators in recent weeks, traders will look for cues for any reference to rate increases in tomorrow’s BoE minutes.
US Dollar – US Markets
The US Dollar edged higher against the Euro yesterday. In macro news, the Chicago Fed national activity index continued to decline for March, the weakest reading since January last year. Moreover, the previous month’s reading was revised further down. This data, along with a string of recent economic releases, has further added to evidence that the macro trend in the US has suffered in the first quarter of this year, thus fuelling speculation of a delay in raising interest rates. Elsewhere, the New York Fed President, William Dudley, indicated that FOMC members are in no hurry to increase interest rates. He stated that the recent weakness in the US economy is hopefully temporary.
The US Dollar is trading firmer against the major currencies this morning, amid a light day for economic releases in the nation. Traders will look forward to tomorrow’s US housing market data for further direction.
Euro – European Markets
The Euro traded on a weaker footing against the US Dollar yesterday, amid mounting fears that Greece would default in repaying its debt and exit the Euro zone. Athens is in negotiations with its international creditors over reforms required to unlock additional bailout funding. Additionally, media reports revealed that the Greek government has ordered local governments to transfer cash balances to the central bank, as it is due to pay salaries as well as make debt payments to the IMF. Elsewhere, the ECB Vice President, Vitor Constancio, stated that he is convinced that Greece would not have to leave the Euro bloc, however, he cautioned that the ECB cannot promise funds to the nation. On the macro front, Germany’s producer prices came in below market expectations for March and construction activity in the Euro zone slipped into negative territory for February.
The Euro has lost ground against its key peers this morning. Sentiment towards the Euro is expected to be influenced by Germany's ZEW economic sentiment data, scheduled shortly. Investors expect that the survey will show rising optimism about the nation’s economic recovery.
Other Currencies – Highlights
The Reserve Bank of Australia Governor, Glenn Stevens, raised prospects for an interest rate cut as early as next month, to rebalance the struggling domestic economy. He hinted that the current historically low interest rates in the nation could go still lower. He also pointed to elevated unemployment levels and demand being on the soft side. The Australian Dollar started to lose ground against the US Dollar following the Governor’s comments.
Subsequent to the Governor’s speech, the Aussie continued to trade on a weak footing after minutes of the RBA’s latest monetary policy meeting were in line with comments by the Governor that interest rate cuts might be required for sustainable growth in the nation. The minutes showed that even as policy makers decided to keep interest rates steady, they remained cognisant of the fact that the nation’s economy is growing slower than its long-term average growth. Going forward, investors will eye Australia’s consumer price index, scheduled tomorrow, as speculation about the timing of rate cut has attracted attention to the first quarter inflation data.