US Retail Sales Report in Focus
It is a quiet day in terms of economic releases in the UK, two days ahead of the Bank of England’s (BoE) monetary policy meeting and the day before the Chancellor of Exchequer publishes the Annual Budget.
However, across the Atlantic, the economic calendar offers a series of US data releases with February’s retail sales report as the most important publication, ahead of the outcome of two-day Federal Reserve (Fed) policy meeting tomorrow. Markets anticipate retail sales growth to have slightly softened last month, but the positive trend for retail spending seen of late will likely remain intact. Other US data which are scheduled for release later today are the Empire State manufacturing index and the NAHB housing market data.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing against the major currencies this morning, amid no economic updates in the UK for a second consecutive day. Sentiment for Sterling further weakened today after the latest poll in a leading newspaper in the UK revealed that supporters of Britain leaving the European Union are more likely to vote in the forthcoming referendum, which could give the Leave campaign a decisive edge in the final result.
Going forward, BoE officials will gather later this week for its monetary policy meeting and will attract significant market attention. Although the monetary policy committee is anticipated to stick with their current policy stance, market focus will be on whether the BoE hints of a rate cut in the future. The shift follows remarks made last week by the BoE Governor, Mark Carney, that the possibilities of a rate cut have increased. The BoE meeting will be conducted against the backdrop of UK Chancellor, George Osborne’s annual budget, which is due tomorrow. Also, tomorrow’s UK jobs data will probably show that wage growth accelerated in January.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the Pound this morning ahead of tomorrow’s Federal Open Market Committee rate decision. Although the US central bank is not anticipated to make any changes to its current policy stance, the Fed might sound less dovish as the US economy has shown signs of improvement since the Fed’s last meeting. On the data space, investor focus will be on February retail sales figures from the US which are anticipated to show that consumer spending suffered a slight setback for the first time since September 2015. However, a mild slowdown in retail sales growth in the previous month is unlikely to derail the positive trend seen in the past few months. Moreover, that would add to speculation of a less dovish Fed in the upcoming policy meeting.
Additionally, market participants will closely monitor today’s NAHB survey data for the home building industry, producer prices index and the New York Fed’s data on manufacturing activity in the bank's region for more information about the strength of the US economy in the first quarter.
Euro – European Markets
Currently, the shared currency - US Dollar is trading modestly flat, with the currency pair having slipped below the 1.11 mark. On the other hand, the Euro is trading on a firmer footing against the Pound this morning. Looking at today’s macroeconomic prints, data showed that French consumer prices recovered in February on the back of an increase in the price of energy and services due to seasonality. However, on an annual basis, French inflation dipped into negative territory as expected in February. This was the first drop in prices since March 2015. In a separate data, Italy’s consumer prices fell in line with market expectations for February. Later today, the Euro zone’s employment change data for the final quarter of 2015 is due for release.
Yesterday, the only data in the European docket showed that industrial production in the Euro zone bounced back in January, to record its highest rate since January 2010. The increase in production was the highest in non-durable consumer goods, while output in the energy industry declined in January.
Other Currencies – Highlights
The Australian Dollar has extended its losses against the US Dollar today following the release of the minutes of the Reserve Bank of Australia's (RBA) monetary policy meeting in March in which the central bank had kept its interest rates unchanged at a record low of 2%. In the minutes, the RBA struck a slightly more dovish tone as it indicated that persistently lower inflationary pressures and a weak growth rate provided a scope to ease its monetary policy further. The members of the RBA monetary policy board also commented that a string of recent economic updates in Australia point towards a moderately growing economy for the first quarter, while the minutes also suggested that the central bank had become more concerned about the outlook for the global economy.
Going forward, trading in the Aussie Dollar - US Dollar currency pair will be dependent on a slew of key economic releases, scheduled for release today in the US, given the absence of noteworthy Australian economic data in the session ahead.