Tag Archives: Euro

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.  

On the monetary policy front, the ECB’s monetary policy meeting summary found a balance, yet it lacked any new information. The minutes stated that the case for considering rate cuts was strengthening, but also highlighted concerns about service inflation.

However, it additionally said that the ECB will have “significantly more data and information by the June meeting,” implying that a first-rate decrease may be required then. Regardless, the minutes had no substantial effect on market rates yesterday.

Similarly, remarks by several Fed officials had no significant impact on trading conditions, as currency markets remained range bound. Of the limited price activity that occurred, the dollar remained under some minor weakness throughout the European trading day until recovering from a dip overnight.

Looking ahead today, Nonfarm Payrolls data is likely to reveal that the US economy generated 200,000 jobs last month, down from the 275,000-gain recorded in February. January’s figure was notably lower, showing 229,000 employment added rather than 353,000 as first reported.

The unemployment rate will likely stay at 3.9%. Meanwhile, Average Hourly Earnings, a major indicator of wage inflation, is expected to rise 4.1% for March, a slight decrease from February’s 4.3% growth.

In the eurozone, analysts currently anticipate Eurostat’s preliminary flash estimate of 2.5% for March, down from 2.6% vs. February. This comes after recent national data releases, especially those from Germany and France, which have surprised on the downside. Core CPI inflation is also expected to reach a two-year low of 3.0% or lower.

Meanwhile, the Eurozone unemployment rate, which will be released shortly, is expected to continue at a low of 6.4%, keeping policymakers on alert against wage pressure. Overall, it looks like the first rate drop in next week’s ECB policy report is too soon.

There are a few important US data releases today before Friday’s highly anticipated monthly labour market report.

To begin, the unofficial ADP employment report will be closely watched as an indication of Friday’s job numbers. Its expected that there will be an increase of 180k for ADP private sector payrolls and 225k for Friday’s official payrolls.

A nice busy day coming back from Easter.

Already released this morning we have had the UK House Price Index showing a 0.2 percent fall for March. The figures show that house prices are gradually coming down but probably not as fast as predicted. Over the past 12 months UK house prices are 1.6 above the previous year.

Later this morning we have French, German and EU PMI figures for the manufacturing sector. All sets of data will be closely watched for signs that the manufacturing sector is picking up.

For the UK, the consumer lending figures (i.e. mortgage approvals & lending) will give some further indications of lending conditions. Markets will also be keen to see if the housing market activity is picking up now that interest rates have thought to have peaked.

German CPI will be the main focus today, ahead of tomorrow’s Eurozone flash estimate. Already released French and Italian data point to downside risks to the Eurozone outturn.

To cap the day off, this afternoon for the US, we have Factory orders & JOLTS numbers due.

The dollar has continued to strengthen against the pound over the Easter weekend and was helped further after the ISM manufacturing report was released yesterday.

The pound to euro continues to look positive as expectations on the ECB cutting rates before the Bank of England are now almost fully priced in.