Potential positivity for the Pound
Sterling showed signs of strength yesterday as the currency made gains against the Yen, Euro and Dollar. GBPUSD broke through the 1.4250 barrier to reach six-day highs, which it has sustained to open at 1.4264 this morning.
UK Core Consumer Price Index (CPI) for March is due for release at 09:30am and is expected to tick higher (0.4% YoY and 0.3% MoM). This inflation increase looks to have been already been priced into the market. However, a better than expected CPI figure could rejuvenate yesterday’s positivity surrounding Sterling and increase pressure on the Bank of England (BoE) to normalise rates sooner rather than later. Despite the Monetary Policy Committee (MPC) being widely expected to maintain the record-low interest rate ahead of the Brexit Referendum in June, increasing price pressures may prompt Mark Carney to adopt a more hawkish tone over the coming months.
The Dollar started off this week on the defensive as the Dollar Index fell to a near eight-month low yesterday. Due to the fact there was no macroeconomic data released in the US, we saw EURUSD trade in a range all day, with traders trying to find a clear direction to drive the pair. The pair made an attempt to break through the 1.1450 level, but any move above that level is proving difficult for Euro bulls. The Dollar did strengthen in the afternoon and the pair fell 0.36% to open this morning at 1.1407. With a quiet economic calendar for the Dollar today, any volatility will come from wider market sentiment.
The Euro saw losses of nearly 1% yesterday against Sterling as GBPEUR rose to 1.2400 levels, briefly pushing above the 1.2500 mark as the Pound regained some strength. The only data of note for the Eurozone today has already been released this morning from Germany. German inflation figures for the month of March have all printed in line with expectations, suggesting signs of controlled gains in the German economy which is positive, but not doing much to alter the strength of the Euro.
Data to watch: 7am German CPI (MoM)(YoY). 9.30am UK PPI Input & Output (MoM)(YoY). UK Core CPI (YoY) & CPI (MoM)(YoY).