UK Core CPI Rate Steady in February
Today is a busy day for economic news across the major economies. In the UK, the just out inflation data indicated that price pressures remained subdued as the core consumer prices index remained unchanged in February and well below the Bank of England’s (BoE) desired target.
In Europe, preliminary PMI readings from the Euro zone suggested that private sector firms ended the first quarter on a positive note. This was followed by the German Ifo index figures which showed a modest improvement in business sentiment for March. Across the Atlantic, the flash estimate of the US manufacturing PMI, due for release later today, will give additional cues about the state of the largest economy in March.
Pound Sterling – UK Markets
The Pound - US Dollar currency pair dropped below the 1.42 mark earlier in the day amid broad based recovery in the greenback in the wake of news of terror atrocities in Brussels. In economic news, the just out UK economic data showed that core CPI remained steady from a year ago in February. The unchanged core inflation data provides another reason for the BoE to delay its plans to normalise monetary policy. Also, the headline inflation rate remained unchanged from January’s twelve month high, missing expectations of a rise. Data showed that transport costs acted as a major drag on prices, which was partially offset by increasing food prices in the previous month. In separate data, the UK’s public accounts recorded a deficit in February after a surge in tax receipts at the onset of this year had helped boost the government’s coffers.
Going forward, investors will shift their attention towards the next important data sets in the UK, such as retail sales and BBA mortgage approval numbers which are scheduled for publication later in the week.
US Dollar – US Markets
The US Dollar latched on to its gains against the shared currency and the Pound yesterday even after the Chicago Fed National Activity Index fell for the fifth time in February. Data indicated that growth in economic activity in the previous month was lackluster as producers curtailed activity. Additionally, sale of previously owned homes in the US dropped more than expected in February, hinting that demand in the housing sector might be cooling amid a rise in prices and short supply of inventories. Elsewhere, Atlanta Federal Reserve President, Dennis Lockhart, stated that the US economy was strong enough to justify an interest rate rise as soon as the next monetary policy meeting, scheduled for the end of April.
Looking ahead, investor focus will be on the preliminary manufacturing PMI for this month which is due for release later today. Markets will be looking for early signs of the performance of the manufacturing sector in the end of the first quarter after a run of reports published last week pointed to a recovery in factory activity.
Euro – European Markets
The Euro is trading higher against the Pound this morning, following the release of a number of key data points that came out earlier today from the Euro area. Data on the Euro zone’s private sector was a welcome end to the signs of a slowdown seen in the first two months of 2016. The preliminary sentiment readings indicated that activity in both the Euro zone manufacturing and services industry showed improvement in March. Additionally, the French services sector activity returned to growth in March. However, the PMI profile for manufacturers slipped to the lowest level since August 2015. Also, the German economy is likely to have recorded modest growth in March as the strong services sector offset the manufacturing industry’s lowest rise in output since November 2014.
Also on today’s calendar are the ZEW economic sentiment and Ifo business climate surveys that would offer additional insights about the German economy in March. Earlier today, the German Ifo business sentiment improved more than expected in March. The ZEW survey results will be out in a short while.
Other Currencies – Highlights
The Australian Dollar recovered lost ground and jumped above the 0.76 mark against the US Dollar today following a speech by the Reserve Bank of Australia's (RBA) Governor on how the Australian economy would fare in the event of another global crisis. RBA Governor, Glenn Stevens, expressed optimism about Australia’s economy and its domestic financial system, but called recent data on the nation’s labour market as more ambiguous. Although he made no comment about the future path of rate cuts, he did note that there was still room to cut interest rates if needed to weather any future storms. On the macroeconomic front, data showed that house price growth in Australia slowed in the fourth quarter, though it was better than what markets had anticipated. The modest rise in house prices was likely supported by two interest rate cuts undertaken by the RBA last year.
In the absence of more domestic economic news, a string of US economic releases, including the flash manufacturing PMI will be eyed by investors today for further direction.