Volatile week ahead following events in Brussels
Current events unfolding in Brussels this morning will create uncertainty for the rest of the week at least. The initial reaction has been currency flows from Euro and Sterling to the safe haven of Japanese Yen.
The monthly Eurozone Markit PMI data is due this morning – we will see the statistics printed for Services PMI, Manufacturing PMI and PMI Composite. With the trio expected to come in at above the 50 level, early signs are showing that we may see strength in the single currency against its major FX peers as any number printed above 50 is seen as bullish for the Euro. The single currency was down 0.3% yesterday against Sterling and has been trading range-bound since the 17th of March.
For the UK, CPI inflation data is released this morning and will be closely watched by the Bank of England as it forms the basis of their inflation target. The February inflation rate is expected to come in at 0.4%. However, anything closer to the Bank of England’s target of 2.0% will likely buoy Sterling across the board.
MPC Member Kristin Forbes will also be holding a talk today at the Royal Economic Society Conference in Brighton. The talk, about current account deficit in the UK, could also impact Sterling, especially if Forbes adopts a hawkish tone when announcing possible future plans.
The Atlanta Fed President Dennis Lockhart stated that there was sufficient economic momentum to justify a further rate hike “possibly as early as the meeting scheduled for the end of April.”. This provides some bullish news for the Dollar after the dovish Federal Open Market Committee meeting last week.
The Dollar clawed back some of last week’s losses, gaining 0.5% against the Pound despite a weaker than expected Chicago Fed National Activity Index. Cable opens this morning at 1.4369. EURUSD opened yesterday at 1.1263, and traded sideways for much of the day to show small Dollar gains this morning opening at 1.1239.
Data to watch: 8.30am German March Markit PMI, Manufacturing & Services. 9am Euro March Markit PMI, Manufacturing & Services. 9.30am UK February Consumer Price Index, February Producer Price Index, February Public Sector Borrowing. 10am German ZEW Survey Economic Conditions & Current Situation, Euro ZEW Survey Economic Sentiment. 1.30pm US January House Price Index. 1.45pm US March Markit Manufacturing PMI.