Market Consolidates Ahead of German CPI Data
GBP
GBP/USD has increased and is currently trading at 1.2545 (interbank). GBP/EUR has pushed higher and is presently trading at 1.1690 (interbank).
Last week saw robust preliminary Services PMI figures and comments from BoE Chief Economist Huw Pill indicating that interest rate cuts are not on the immediate horizon.
The British Pound has strengthened amid expectations in the market that the Bank of England (BoE) will likely refrain from reducing borrowing costs until the next quarter.
Moreover, sustained inflationary pressures and strong domestic Purchasing Managers Index (PMI) figures have postponed anticipations for the initial BoE rate reduction.
During the press conference following the last monetary policy meeting, BoE Governor Andrew Bailey remarked that two or three rate cuts this year are not "unreasonable."
This week's agenda includes the release of Mortgage Approvals and Mortgage Lending tomorrow, and the final S&P PMI data on Wednesday and Thursday.
No significant events are scheduled for today.
EUR
EUR/USD is steady and currently trading at 1.0728 (interbank).
ECB policymakers have underscored the cooling inflation in the Eurozone and hinted at the possibility of interest rate cuts preceding those by the Fed. ECB President Christine Lagarde suggested that the central bank is likely to commence lowering its deposit rate from a record-high 4% in June, while keeping its options open for the subsequent trajectory.
Investor focus will primarily shift towards incoming inflation data, with the initial reading of the German Consumer Price Index (CPI) slated for release shortly.
On Wednesday, the Eurozone Gross Domestic Product (GDP) for Q1 and the Harmonized Index of Consumer Prices (HICP) will be unveiled.
Additional data releases this week encompass Retail Sales in Germany, PMI data, and harmonized inflation data.
Today’s Events (GMT):
13:00 German CPI (Apr) – Forecast: 2.3%
20:20 ECB's De Guindos Speaks 13:00 German CPI (Apr) – Forecast: 2.3%
20:20 ECB's De Guindos Speaks
USD
The dollar index, which measures the currency against a basket of other major currencies, is currently trading at 105.61 .
In the previous week, the Personal Consumption Expenditures (PCE) Price Index surged by 2.7% YoY in March, surpassing the previous reading of 2.5%, and exceeding the estimated 2.6%. The Core PCE figure, considered the Fed's preferred inflation metric, remained steady at 2.8% YoY in March, firmer than the expected 2.6%. On a monthly basis, both the headline PCE and the core PCE Price Index rose by 0.3% in March.
Recent US inflation data have tempered expectations regarding the timing of potential interest rate cuts by the Federal Reserve (Fed). According to the CME FedWatch tool, the likelihood of a rate cut by the July meeting has decreased from 50% last week to 25%, while traders have priced in nearly 60% odds of a rate cut at the September meeting.
The focal points for the week will be the Federal Reserve monetary policy meeting and the release of non-farm payrolls on Wednesday and Friday, respectively.
The Fed is anticipated to maintain the interest rate within its current range of 5.25%–5.5%. Moreover, analysts expect a gain of 210,000 nonfarm payrolls in April, with the unemployment rate forecasted to remain stable at 3.8%.
No significant events are scheduled for today.
CAD
Given that inflation levels remain within the Bank of Canada’s target range, it is probable that the BoC will opt for interest rate cuts, with many economists foreseeing such a move in June.
Crude oil prices have retraced gains from last week as peace talks between Israel and Hamas in Cairo have eased concerns about a broader conflict in the Middle East. Brent crude fell by as much as 1.1% to $88.55, while West Texas Intermediate (WTI) is down by around 1% at $83.01 per barrel.
Canada is not expected to release significant data until next Tuesday’s Gross Domestic Product (GDP) report. The estimate for the month indicated a 0.4% increase in real GDP.
Furthermore, Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers are scheduled to appear on Parliament Hill this week. They will attend the Senate committee on banking, commerce, and the economy on Wednesday, followed by the House of Commons finance committee on Thursday.
No significant events are scheduled for today.
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