UK Public Sector Net Debt Rises
Data just out has shown that public sector net borrowings in the UK registered a less than expected rise for February, after a decline in January. With no other notable domestic macro triggers today, Sterling investors will keep a tab on next week’s consumer price inflation and retail sales numbers in the UK for further direction.
Across the Atlantic, a weekly survey released yesterday revealed that initial jobless claimants in the US increased less than expected for the previous week. In the Euro zone, a report released earlier today showed that on a monthly basis producer prices in Germany increased for February, after registering consecutive drops for the prior two months.
Pound Sterling – UK Markets
The just out public finances report showed that net borrowing for February was slightly lower than expected, as the nation’s finances were boosted by high income tax receipts. With the current financial year drawing to an end, public finances for the upcoming fiscal year will be heavily influenced by the outcome of UK elections in the coming months. The Chancellor has reaffirmed his intent towards lowering UK debt in the coming years and it remains to be seen if the incoming government remains committed to walking a tightrope while dealing with fiscal challenges in the nation. Meanwhile, the Pound has shown little reaction to today’s data and has continued to trade in a tight range against the majors this morning.
Yesterday, the Pound remained under pressure against the majors after the BoE’s Chief Economist, Andrew Haldane, hinted at chances of an interest rate cut in the UK amid a downward trend in the nation’s inflation. This was in contrast to Mark Carney’s comments last week where he ruled out the possibility of a rate cut in Britain.
US Dollar – US Markets
The US Dollar steadied against the major currencies yesterday, rebounding from previous lows seen in the aftermath of the FOMC policy meeting. The Philadelphia Fed index, which measures manufacturing activity in the Philadelphia region, recorded its lowest level since February 2014 and dropped for the fourth straight month in March as firms reported an overall decline in shipments and in labour hours. However, firms remained confident about an increase in overall business and employment over the next six months. Separately, the number of new unemployment claims rose marginally for last week. Labour market indicators will remain in focus, as the Fed this week had stated that it wants to see further improvement in job additions before tightening monetary policy. In another report, US current account deficit widened more than market expectations for the fourth quarter of last year.
The greenback has nudged lower against the Euro this morning, amid no significant macro releases today. Looking ahead next week, the key economic release will be the consumer price inflation data, scheduled on Tuesday.
Euro – European Markets
The Euro lost ground against the US Dollar yesterday, continuing to surrender a portion of its gains registered in the aftermath of the FOMC monetary policy meeting. Meanwhile, data showed that banks borrowed €97.8 billion in four-year loans from the central bank in the third installment of a lending programme launched last year. Through the TLTRO mechanism banks have already borrowed €310.6 billion, with another five rounds of allotments still remaining. The uptake from the third tranche was better than what many observers had expected. Separately, the Greek Prime Minister, Alexis Tsipras, in the EU summit has committed to providing a list of specific reforms in the coming days as demanded by its creditors. Reports revealed that Greece and its international creditors have made little progress in their debt negotiations, as differences on key issues still remain.
The Euro has edged slightly lower against the majors after just released data from Germany showed producer price index rose but less than market expectations for February. However, prices were still in the negative territory on an annual basis.
Other Currencies – Highlights
The Australian Dollar is trading higher against the greenback this morning after the Reserve Bank of Australia Governor, Stevens, in his speech revealed that the recent decline in the exchange rate was helping the nation’s economy to rebalance. The Governor noted that the transition from mining led growth to other forms of activity in Australia has not been easy for the economy. However, he indicated that a weaker currency, together with a pickup in growth in the United States and low oil prices are supportive of the economy. He added that the central bank needs to bring down unemployment to boost both business and consumer confidence.
After cutting rates in February, the RBA held its key rate steady earlier this month to provide the nation’s economy some time to adjust to the earlier rate cut. However, the central bank made it clear that it will ease again if the economy shows no signs of picking up. Going forward, investors will keep a tab on the CB leading indicator, scheduled early next week in Australia, for further direction.