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Powell’s got the Power

Powell’s got the Power

GBP
UK consumer prices rose by 0.4% for February with the year-on-year inflation rate declining to 2.7% from 3.0% back in February 2017. Annual inflation was below the market expectations of 2.8% and was coupled with producer prices data coming in lower than consensus forecasts, maintaining expectations that inflation has peaked.

The Pound weakened off the back of inflation data against the Dollar before making a steady recovery to breach the 1.4000 barrier. Fresh uncertainty surrounding the Bank of England monetary policy will certainly keep the Pound in check going forwards but a rate increase is expected at the May meeting.

Overall Sterling sentiment also remained firm following Monday’s deal on a Brexit transition. This caused the Euro to weaken off against Sterling as fresh five-week highs were hit at 1.1435. Markets will monitor the labour-market data today for further evidence come employment and earnings growth.

USD

The key focus for this week continues to be the Federal Reserve (Fed) officials’ latest economic projections, more specifically on the outlook for future interest rates as represented by the ‘dot plot.’ This is closely followed by the new Fed Chair Jerome Powell’s comments at the post-meeting press conference which will be closely scrutinized for clues on the Fed’s monetary policy outlook for the rest of 2018 and eventually will allow the market to determine the Greenback’s near-term trajectory.

The Federal Open Market Committee (FOMC) concludes its two-day policy meeting today, with an official rate statement due at 18:00 GMT. There is a 94.4% chance the federal funds rate will rise to 1.75% from the current rate of 1.5%.

EUR

The Euro dropped in value to against the US Dollar yesterday, retreating to 1.2240 as the German ZEW economic sentiment indicator fell to 5.1 from 17.8. This was significantly below consensus forecasts and lowest reading for 18 months.

Confidence in the Euro was hampered as a result of the aforementioned decline with evidence of the strong Eurozone recovery losing momentum and a looming potential trade conflict.

Data to Watch:

08:00 EUR Non-monetary policy’s ECB meeting
09:30 GBP Average Earnings excluding Bonus (3Mo/Yr) (Jan)
09:30 GBP Claimant Count Change (Feb)
09:30 GBP ILO Unemployment Rate (3M) (Jan)
09:30 GBP Average Earnings including Bonus (3Mo/Yr) (Jan)
09:30 GBP Public Sector Net Borrowing (Feb)
14:00 USD Existing Home Sales (MoM) (Feb)
18:00 USD FOMC Economic Projections
18:00 USD Fed’s Powell Speech
18:00 USD Fed’s Monetary Policy Statement
18:00 USD Fed Interest Rate Decision
18:30 USD FOMC Press conference
20:00 NZD RBNZ Interest Rate Decision
20:00 NZD RBNZ Rate Statement

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