US FOMC Meeting Minutes in Focus
Today’s publication of the minutes of the US Federal Open Market Committee’s (FOMC) meeting held in March will be closely followed by investors for further insights into the interest rate increases this year. Separately, investors will eye a couple of speeches by key Federal Reserve (Fed) officials, scheduled later in the day. Also on tab will be weekly mortgage application numbers in the US.
Meanwhile, it is a light economic calendar day in the UK. Earlier today, the BRC shop price index continued to remain in negative territory for almost close to three years, indicating that prices of non-food products in the UK continued to remain under pressure. In the Euro region, data showed that German industrial production fell due to a slowdown in manufacturing and energy sectors.
Pound Sterling – UK Markets
The Pound extended its losses against the US Dollar this morning to trade near the crucial 1.41 mark as the currency pair remained under pressure due to negative sentiment surrounding global financial markets and concerns over a looming Brexit. Earlier today, data showed that shop prices on non-food items in the UK continued to drop for the 36th consecutive month in March as retailers adopted a price reduction strategy to lure customers. The March reading showed that prices fell by the smallest amount since September 2015. However, the trend is expected to continue as retailers might continue with their promotions to maintain market share amid flat consumer confidence, a relatively benign economic environment with very low inflation levels and subdued oil prices, as well as a competitive market.
Moving ahead, a report indicating the GDP estimate over the last three months till March, scheduled for release towards the end of this week, will attract significant market attention along with Britain’s industrial production and trade data for February.
US Dollar – US Markets
The US Dollar has edged higher against the shared currency and the pound this morning, as investors position themselves for today’s publication of the minutes of the March FOMC meeting. The interest rate increase forecast has been dovish over the past two weeks, in the wake of global headwinds. This might have tempered expectations for a rate increase by the Fed in its policy meeting scheduled later this month. Investors will eye a couple of speeches by key Fed officials scheduled later today for further insights over the stance of the central bank lately.
Yesterday, the Chicago Fed President, Charles Evans, in his speech at the Credit Suisse Asian Investment Conference in Hong Kong, stated that the central bank remains on path to raise interest rates twice this year. However, uncertainty over rate increases persisted as he refrained from commenting on the timing of the same. On the economic data front, a report by the Institute for Supply Management indicated that the US services sector expanded at a faster than anticipated pace in March following a slowdown in the nation’s service activity in the previous two months.
Euro – European Markets
Even though the Euro traded on a weaker footing against the US Dollar this morning, it hovered near its five-month high level. Data published earlier today revealed that German industrial production declined less than expected in February, largely due to a slowdown of activities in the manufacturing and energy sectors despite robust domestic demand. Yesterday’s unexpected decline in German factory orders and waning demand from China and other emerging markets is likely to pose a threat to the growth momentum in the second quarter.
Yesterday, data showed that retail sales in the Euro zone climbed for a fourth consecutive month and came in higher than expected for February. This was largely due to growing demand in France and Spain which helped to offset a fall in demand in the Euro zone’s largest economy. Investors will look forward to tomorrow’s publication of the ECB’s monetary policy meeting minutes and a speech by The European Central Bank President, Mario Draghi, for further insights into the health of the Euro area’s economy.
Other Currencies – Highlights
The Japanese Yen continued to trade close to its 17-month high level against the US Dollar this morning. The demand for the safe haven currency surged yesterday after the global equity markets experienced turmoil, while weakening of oil prices also boosted the local currency. This has raised speculations that the Bank of Japan might intervene to weaken the Japanese Yen. In economic news, an indicator that forecasts the future direction of Japan’s economy fell for a third straight month in February albeit in line with market expectations. The preliminary survey of Japan’s leading index fell to its lowest level in February since April 2013.
Going forward, the direction in the US Dollar - Japanese Yen currency pair will be dependent on today’s publication of the minutes of the FOMC meeting in the US, which is anticipated to provide insights over the US Fed’s stance on the interest rate path for this year.