Investors to Monitor UK and US Inflation Data This Week
GBP
GBP/USD is currently at 1.2626 (interbank), while GBP/EUR has risen, presently trading at 1.1722 (interbank).
Today, investors will closely watch a speech from Bank of England Governor Andrew Bailey, which could set a new tone for March’s monetary policy meeting. In the last monetary policy statement, Bailey pushed back on rate-cut expectations amid low confidence in inflation returning to its 2% target soon.
Several economic data releases are due from the UK this week. Markets will closely watch labour, inflation, and growth data as investors try to gauge the timing of the Bank of England’s first rate cut.
Tomorrow’s employment report is expected to indicate moderating wage growth as the labour market cools, though it may remain too high for the BoE’s preference.
Additionally, the latest inflation figures, due out on Thursday, are expected to show slight increases in Headline inflation and Core Inflation to 4.1% and 5.2%, respectively.
Today’s Events (GMT):
18:00 - BoE Gov Bailey Speaks
EUR
EUR/USD has slipped to 1.0774 (interbank), reaching its lowest level since November 14 but gaining some positive traction in today’s session.
Several ECB officials have tried to temper expectations for early policy easing, though markets are pricing in the possibility of the first-rate cut at the start of the second quarter.
German inflation fell to a 2.9% YoY rate in January from 3.7% in the previous month, validating the view that price pressures are easing.
ECB Governing Council member Fabio Panetta mentioned that the rate cut moment is fast approaching and that timely and gradual steps could help reduce ensuing volatility.
Data is light today; however, German and Eurozone ZEW surveys will be published tomorrow.
Today’s Events (GMT):
10:00 - European Union Economic Forecasts
10:00 - Eurogroup Meetings
13:15 - ECB's Lane Speaks
USD
The U.S. dollar index, measuring the dollar against a basket of six currencies, is trading 104.172, up 0.09%.
Following recent strong jobs and growth data, markets have pushed back bets on the timing of Federal Reserve interest rate cuts. All eyes will be on Tuesday’s inflation report for January.
Economists anticipate a 0.2% rise in consumer prices from the previous month, with an annual increase of 2.9%. Underlying inflation is expected to increase by 3.8% from a year earlier.
Stronger-than-expected data could convince the Fed to delay the easing cycle, supporting the U.S. Dollar.
Additionally, several Fed officials suggested they want more time to observe whether inflation continues to decline.
Data is light today; however, FOMC members Bowman and Kashkari are scheduled to speak later.
Today’s Events (GMT):
14:20 - FOMC Member Bowman Speaks
18:00 - FOMC Member Kashkari Speaks
19:00 - Federal Budget Balance (Jan) – Forecast: -39.3B
CAD
USD/CAD is currently trading at 1.3460 (interbank) after a volatile session on Friday.
Friday saw a surprise decrease in the Canadian Unemployment Rate to 5.7% in January from 5.8% prior, better than the market expectation of a 5.9% reading. Net Change in Employment rose to 37.3K, surpassing the expected 15.0K and 12.3K prior. However, Average Hourly Wages (YoY) grew by 5.3% compared to the previous growth of 5.7%.
Declining crude oil prices might have weighed on the Canadian Dollar, as Canada is the largest oil exporter to the United States.
Housing data will be in the spotlight Thursday with the latest January home sales figures due to be published after regional numbers showed the market is bouncing back to life.
Statistics Canada will release its monthly manufacturing survey for December on Thursday and wholesale trade numbers for December on Friday.
No significant events are scheduled for today
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