US Fed’s Unexpected Meeting in the Spotlight
In an unexpected closed meeting to be held today, the US President, Barack Obama, is likely to meet the US Federal Reserve (Fed) Chairwoman, Janet Yellen, to discuss the state of the US economy and regulatory issues. In an economic calendar bereft of data in the US and the UK today, investors will look forward to a speech by a key Fed official, William Dudley, for further insights into the central bank’s stance over the interest rate decision.
Earlier today, data showed that Italy’s industrial production retreated in February, raising fears over a slowdown in the nation’s economic growth. Industrial production growth in January was revised to show a slightly lower reading.
Pound Sterling – UK Markets
The Pound is trading on a stronger footing against the greenback this morning. With no major economic releases scheduled in the UK and the US, trading in the Pound - US Dollar currency pair is anticipated to remain subdued. Meanwhile, the Pound extended its gains against the shared currency after the release of Italian industrial production data which showed that industrial output in the third largest economy of the Euro zone weakened in February, but slightly lower than the market estimate.
On Friday, the National Institute of Economic and Social Research estimated that the UK’s economic growth picked up in the first quarter of 2016, after its December-February reading was revised downwards, weighed down by weakness in the nation’s manufacturing sector. Meanwhile, rising concerns over the fast approaching Brexit referendum which will decide whether Britain will remain in the European Union or not, weighed on the nation’s growth expectations. Going forward, investors will eye tomorrow’s BRC retail sales data for further direction in the Pound against its key currency peers.
US Dollar – US Markets
The US Dollar traded close to its six-month low level against the shared currency on Friday. Investor sentiment weakened post publication of the minutes of the Fed’s latest monetary policy meeting which indicated that the central bank was cautious over the interest rate decision amid a slowdown in the nation’s economic growth and instability in global financial markets. Separately, the New York Fed President, William Dudley, also commented in line with the Fed’s approach, indicating that the central bank should exercise caution and take a gradual approach to raise the benchmark interest rates for a second time.
Investors will eye today’s unexpectedly scheduled closed meeting in which the US President, Barack Obama, will meet the Fed Chairwoman to discuss the nation’s economic outlook and to decide on the Fed’s advance and discount rates. On the economic data space, investors look forward to a string of key economic releases scheduled later in the week, including retail sales data, consumer price inflation data, and a few speeches by key Fed officials for further direction in the US Dollar against its currency counterparts.
Euro – European Markets
The shared currency has lost momentum against the US Dollar this morning and is currently trading below the crucial 1.14 mark. Today’s release showed that industrial output in the third largest economy of the Euro zone contracted in February, but was slightly better than expected. This data suggested that the industrial activity in the Euro region is poised to contract, following similar readings in the top two economies of the Euro zone, Germany and France. Italy’s industrial production growth was revised to show a slightly lower jump at the start of the year.
Going forward, with instability in equity markets and a slowdown in global economies, contraction in Europe’s industrial activity could raise concerns over the overall economic growth in the Euro region. Investors will keep a tab on the Euro zone’s industrial production figures scheduled later in the week. Also, consumer price inflation data scheduled to release for the Euro zone and its peripheries might add to the existing fears.
Other Currencies – Highlights
The Australian Dollar is trading on a weaker footing against the US Dollar in subdued trading today, as investors look forward to an unexpected closed meeting to discuss advance and discount rates charged by the US Fed banks. Last time when the US Fed held such an unexpected meeting in November, the US central bank ended up raising its benchmark interest rate from its record low level in the subsequent monetary policy meeting in December.
Earlier in the day, data showed that the number of loans issued to people who purchased or built homes for residential purposes in Australia rose less than estimated in February, following a decline in the previous month. Later in the week, the direction in the Australian Dollar - US Dollar currency pair will be dependent on a string of economic releases in the US, including retail sales and consumer price inflation data along with Australia’s consumer confidence index and jobs data.