Category Archives: FX News

The governor of the Bank of England has indicated that the UK is still on track for an interest rate cut, as official numbers show a further slowing in the pace of price growth in the economy.

The Office for National Statistics (ONS) disclosed that the consumer prices index (CPI) measure of inflation fell to 3.2% in the year to March, the lowest level in two and a half years. That was lower than the 3.4% figure recorded the previous month, but slightly more than many expected.

This morning’s Eurozone March CPI inflation figures will be the final publication and are expected to corroborate the ‘flash’ estimate. The initial estimate indicated a decline of 2.4%.

Progress in inflation and sluggish growth have enabled the ECB to hint that a first rate decrease in June is still possible, maybe earlier than the BoE or the Fed.

This morning’s minor upward surprise in UK inflation provided some support for the pound and helped it erase some of its previous declines against a generally higher dollar.

Retail sales are the main release today. The US report is expected to come in on the downside this afternoon, falling to 0.3% from 0.6%.

Looking ahead this week, the first major data for the UK is the employment figures which is due to be released on Tuesday morning.

Markets are forecasting growth in the ILO Unemployment rate, albeit only a small rise to 4% (from 3.9%). Employment releases are a key indicator for the current state of the UK economy.

Following this, Bank of England Governor Bailey will be speaking at 18:00. It is likely that rate cuts will be the major talking point.

Wednesday sees the release of inflation figures for the UK, where a fall of 0.3% to 3.1% is what markets are currently forecasting.

With the UK dominating markets this week, the pound could show some volatility against the major currency pairings.

On the currency front, the pound continued its heavy decline against the dollar last week. It is now at its lowest level since November last year.

For the pound to euro rate, it continues to sit around this years yearly average.

As expected, the ECB maintained its monetary stance yesterday. However, the meeting statement underlined that if the ECB’s updated assessment of the inflation outlook offers it more confidence that underlying inflation is approaching its 2% target. 

President Lagarde stated, that the ECB is not “pre-committing to a particular rate path.”. However, the impact of the ECB meeting on market rate expectations was somewhat muted.

The British Pound was broadly supported after the ONS said the UK economy grew in February and revised its initial estimate for January’s growth earlier this morning.

The pound to euro exchange rate rebounded to the 1.17 level after it was revealed that the UK economy gained 0.1% month on month in February, with January’s number revised up to 0.3% from 0.2%.

Pound to Dollar exchange rate remains weak in the face of the larger U.S. dollar surge that has driven FX activity since the release of positive U.S. labour market and inflation statistics yesterday.

Looking ahead to today, the main highlight will be the preliminary reading of US consumer sentiment for April. Barring any major surprises, though, the data is unlikely to affect the dollar.

The European Central Bank will today announce their latest Interest rate decisions. It is widely expected that they will hold at 4.5% for another month. Although as inflation falls across the eurozone, markets are pricing in the first rate cut for June.

Following the interest rate announcement, investors will be keen to tune into the press conference to see what comments are made regarding rate cuts.

Later this afternoon sees the release of the US Employment figures. Unemployment Claims are expected to fall to 215k (from last week’s 221k).

Alongside this Producer Price Index is another key release for the US today, with Core PPI forecasted to come in on the upside at 2.2% (from 1.6%).

Looking ahead this week, the UK publishes its Growth Domestic Product. It is expected to come in at 0% month on month. This will be released in concurrently with Industrial Production, with markets expecting to see growth in the manufacturing sector.

On the currency front, the pound had a dreadful day against the dollar yesterday falling a total of 140 points off the back of the US inflation data.

For the pound to euro rate there has been no movement of interest. Currently sitting around the yearly average. However, this will likely be volatile this afternoon with today’s releases.

Today will be dictated by a flow of US data later this afternoon.

Todays US March CPI report will be closely watched by markets and will be play a key role on future interest rate cuts.

It is expected that core inflation will ease to 0.3 percent for the month, allowing the annual rate to drop to 3.7 percent from 3.8 percent.

There has been an expectation of late that we could see the US cut interest rates as soon as June and is now priced in as a 50/50 probability. The new expectations come on the back of last week’s stronger than expected employment report.

Later this evening, the minutes of the March Fed policy meeting will be released, and again markets will look for any clues on future interest rate projections.

There is no UK or EU data today, therefore attention will solely be on the US data.

Focus does shift to the EU interest rate announcement tomorrow where it is expected that the headline rate will be left at 4.5 percent.

PPI US data will be released later in the afternoon. To cap off the week, we have the UK Growth figures and Industrial Production numbers released on Friday.