Busy Week: UK Spring Budget, Interest Rates, and Employment Data
GBP
GBP/USD is presently trading at 1.2654 (interbank), while GBP/EUR is currently at 1.1673 (interbank).
Last week, UK Manufacturing PMI data came in at 47.5%, slightly surpassing the forecast of 47.1%, yet remaining below the 50.0% mark.
During a briefing, Bank of England's Chief Economist Huw Pill hinted that interest rate cuts are still distant, awaiting more compelling evidence on inflation control before any action. He cautioned against premature optimism amid potential declines in overall inflation soon.
This week's data for the pound sterling is limited, however, we anticipate releases from The British Retail Consortium (BRC), PMI for Service Sector, and the Halifax House index, offering insights into housing sector health.
Market attention this week is directed towards Jeremy Hunt's testimony on the Spring Budget, often referred to as the "mini-budget." Hunt's statements on fiscal policies and taxation could influence market sentiment amidst ongoing economic uncertainties, providing cues for pound sterling trading dynamics in the near term.
No significant events are scheduled for today
EUR
EUR/USD is currently trading at 1,0857 (interbank).
This morning, the Eurozone Sentix Investor Confidence Index climbed from -12.9 in February to -10.5 in March, reaching its highest level since April 2023.
Last week, Eurozone inflation cooled to 2.6% in February, while Core Inflation rose to 3.1%, excluding volatile components such as energy, food, alcohol, and tobacco.
The main event for the week will be the ECB monetary policy meeting on Thursday. The ECB, expected to maintain rates at a record 4%, faces the challenge of balancing rate levels to contain inflation while not cutting too late as price pressures ease.
Moreover, the ECB has pushed back against rate cut speculation, with markets now expecting 90 basis points (bps) of cuts this year, down from 150 bps anticipated at the start of 2024.
Additional data this week includes Eurozone Services PMI tomorrow and Eurozone retail sales on Wednesday.
Today’s Events (GMT):
09:30 - Sentix Investor Confidence (Mar) –Actual: -10.5 vs Forecast: -10.8
USD
The dollar index, measuring the U.S. dollar against a basket of major currencies, is currently trading at 103.90.
Last week, U.S. Manufacturing PMI data dropped to 47.8 in February from the previous reading of 49.1, below expectations. Softer-than-expected consumer sentiment data and in-line PCE price index data further reinforced this notion.
Several Federal Reserve policymakers indicated that the timing of interest rate cuts would hinge on incoming economic data. Boston Federal Reserve President Susan Collins and New York's John Williams suggested that the first rate cut might be appropriate later this year, while Atlanta's Raphael Bostic expected easing this summer.
The spotlight for the week is on nonfarm payrolls data for February, due Friday, as labour market strength remains a key consideration for the Fed's interest rate adjustments. Expectations are for the creation of 200,000 jobs.
Additionally, Federal Reserve Chairman Jerome Powell will present the semi-annual monetary policy report and testify before Congress on Wednesday and Thursday. Analysts anticipate a reiteration of the stance on sticky interest rates in the near term.
In the monetary policy report released on Friday, the Fed highlighted that inflation expectations were broadly consistent with the 2% target, affirming that it would be inappropriate to lower the policy rate until policymakers are confident of sustained inflation movement towards the target.
Today’s Events (GMT):
16:00 - FOMC Member Harker Speaks
CAD
USD/CAD is currently trading at 1.3562 (interbank) in this morning's session despite higher crude oil prices.
The rise in Crude oil prices followed the decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to extend voluntary oil output cuts, amid extended tensions in the Middle East.
Last week, attention was largely on GDP data for Q4, which exceeded expectations with a 1.0% increase, surpassing the forecast of 0.8%.
The main event this week is the BoC’s interest rate announcement on Wednesday. Market expectations suggest the central bank will maintain its current interest rate at 5.0%.
This follows the recent drop in the annual inflation rate to 2.9% in January, down from 3.4% recorded in December.
Additionally, on Friday, Statistics Canada will publish its Labour Force Survey for February, following the addition of 37,000 jobs in January and a 0.1 percentage point decrease in the unemployment rate to 5.7%.
No significant events are scheduled for today
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