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European Central Bank to take centre stage

European Central Bank to take centre stage

GBP

Despite evidence of a higher mortality rate with the Kent conovirus variant underlying confidence in the UK economic outlook remained strong and as the pace of the vaccination programme continued to spark optimism for strong growth in the second quarter. The row between the EU and UK over vaccine supplies only highlighted how far behind the EU is, which supported the Pound against the Euro. It also raised concerns of further delays in ratifying the EU/UK trade deal in the EU parliament.

Sterling was boosted by global risk conditions and gains on equities markets, enabling a push back above the 1.3900 level against a weaker Dollar and peaking at 1.1695 against the Euro, close to 12 months highs.

The latest RICS housing index beat expectations with a headline reading of 52% from 49% previously. This morning risk conditions have started firm and the Pound has climbed to 1.3940 against the US Dollar but opens slightly lower at 1.1675 against the Euro. Tomorrows UK GDP and industrial production data is forecasted to show a contraction of around 5.0% due to lockdown measures.

 

USD

US consumer prices increased 0.4% for February after a 0.3% increase the previous month and in line with consensus forecasts with the year-on-year rate increasing to a 12-month high of  1.7% from 1.4%. Underlying prices increased 0.1% on the month compared with market expectations of a 0.2% increase with a slight decline in the year-on-year rate to 1.3% from 1.4%. Core prices were dampened by monthly declines in used cars and clothing prices.

The lower core inflation figure reduced concerns over an increase in inflationary pressure and also curbed expectations that the Federal Reserve would have to tighten policy quicker than expected.

 

EUR

The Euro performed pretty flat during Wednesday’s trading session with caution ahead of US inflation data and a lack of conviction on overall direction. 

There was also an element of caution ahead of today’s ECB policy meeting although rumour has it, the central bank are not expected to take significant action at this moment in time. President Christine Lagarde’s comments will be watched closely and could have an impact on the direction of the Euro. 

As of writing, the Euro currently trades around the 1.1940 mark against its US counterpart. 

 

Data to watch

07:45 – EUR – Monetary Policy Statement

07:45 – EUR – Main Refinancing Rate

08:30 – EUR – ECB Press Conference  

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