US Retail Sales and Fed’s Beige Book in Spotlight
In the US, retail sales prints for March due for release later in the day will be closely monitored by investors. Core retail sales are set to bounce back after declining in the previous month. Also, the Beige Book survey, which provides an overview of the current economic conditions in each of the 12 Federal districts in the US, will act as an input for the upcoming Federal Open Market Committee meeting later this month.
In the Euro zone, market participants will look forward to industrial production numbers which are expected to show that industrial activity in the region contracted in February, following a significant surge in the previous month. Earlier today, core inflation in France rose for a second consecutive month in March. The economic calendar in the UK remains light with few second-tier releases scheduled during the day. Investors will eye tomorrow’s RICS housing price balance data ahead of the Bank of England’s (BoE) interest rate decision.
Pound Sterling – UK Markets
The Pound surrendered its early morning gains against the US Dollar and the single currency yesterday after an opinion poll revealed that the percentage of UK nationals favouring an exit from the European Union (EU) has increased to 45%, compared to 42% who are against a Brexit. However, results of a similar poll published in the previous week had shown that the majority were against Britain exiting the EU. Early yesterday, the Sterling traded on a stronger footing against the US Dollar and the Euro after annual consumer price inflation for the UK accelerated to a 15-month high in March, as an early Easter led to a rebound in air fares and clothing prices.
As the UK data docket remains rather quiet today, investors will focus on tomorrow’s survey by the Royal Institution of Chartered Surveyors which is expected to show a slower rise in house prices. Also, the main highlight of the day will be the minutes of the BoE’s latest monetary policy meeting. Expectations are rife that policymakers will unanimously vote to keep interest rates on hold.
US Dollar – US Markets
The US Dollar traded firmer against the shared currency yesterday after the global growth forecast was trimmed by the International Monetary Fund (IMF) for the fourth time in the past year, thus bolstering demand for safer assets. Meanwhile, several speeches by key US Federal Reserve (Fed) officials painted a mixed picture of the interest rate decision in the US. Comments by Jeffrey Lacker, the President of Richmond Fed, indicated that he was in favour of the central bank’s previous forecast of four interest rate increases in 2016. However, another Fed official, Philadelphia Fed President, Patrick Harker, stated that he expects the central bank to delay further rate increases until the nation’s inflation rate picks up.
Going forward, today’s release of the US retail sales data will attract significant market attention. The nation’s core retail sales are anticipated to rebound in March following a drop in the previous month. Markets will also get the latest picture of economic conditions across the 12 Fed regions in the Fed’s Beige Book scheduled to publish later today.
Euro – European Markets
The shared currency traded on a weaker footing against the US Dollar yesterday as demand for safer assets surged after the IMF cut its global growth outlook for a fourth time in the past one year. Meanwhile, concerns over the possible consequences of the UK’s exit from the EU also weighed on the common currency.
The Euro continued to trade lower against its key currency counterparts this morning. Core inflation in the second largest economy of the Euro zone continued to rise for a second straight month in March. This data acts as a key influence on the central bank’s interest rate decision. In the Euro zone, today’s reading of industrial production data is anticipated to show a fall in the Euro region’s overall industrial activity which will follow the previous month’s significant bounce-back in Europe’s industrial activity at the start of the year. This contraction will come in the wake of recent subdued industrial production data from the three largest economies of the Euro zone.
Other Currencies – Highlights
This morning, the US Dollar - Canadian Dollar currency pair is trading close to yesterday’s 9-month low level, as a rise in oil prices bolstered demand for the commodity-related currency. Additionally, fading expectations for an April interest rate increase in the US continued to weigh on the greenback.
Later in the day, the Bank of Canada (BoC) is listed to deliver a highly anticipated economic assessment which will be released as a part of the central bank’s quarterly update to its economic outlook. This report coincides with the BoC’s benchmark interest rate decision announcement followed by a speech from the central bank Governor, Stephen Poloz. In the wake of recent upbeat macroeconomic prints from the nation, the central bank is likely to refrain from any rate cuts in the medium term. The central bank is anticipated to exercise caution with its tone as an over-optimistic tone might pose downside risks to the nation’s export advantage.