Sterling was unable to gain significant support following the higher than expected UK inflation data. There were doubts whether the Bank of England would be able tighten monetary policy aggressively given the threat to the UK economy and real interest rates will remain very negative. The global monetary policy tightening was also a key element limiting potential Sterling support. The currency did, however, gain support from the market failure to hold lower against the dollar and a break higher triggered significant short covering. RICS data recorded a small decline in the housing index to 74% from 78% previously as market supply started to recover. There will also be an element of position adjustment ahead of the Easter holidays in the UK which could lead to a further covering of short Sterling positions.
No Key Data
Relatively narrow ranges prevailed ahead of Wednesday’s New York open as markets continued to evaluate global trends in economic outlook and monetary policies. Underlying Euro-zone sentiment remained weak, especially with important reservations over the situation in Ukraine. There was, however, some reluctance to sell the Euro ahead of Thursday’s ECB policy meeting as position adjustment gathered pace. There will be important hawkish voices within the ECB governing council which will make it difficult for President Lagarde to avoid a more hawkish statement. The bank, however, will still want to maintain as much flexibility as possible.
Key Data
12.45 ECB Interest Rate Decision Exp. 0% Curr. 0%
12.45 ECB Deposit Rate Decision Exp. -0.5% Curr. -0.5%
12.45 ECB Monetary Policy Statement
13.30 ECB Press Conference
US producer prices increased 1.4% for March, above consensus forecasts of a 1.0% increase, with the year-on-year rate at 11.2% from 10.3% the previous month. Underlying prices increased 1.0% for the month with the annual rate at 9.2% from 8.7% in February. The data maintained underlying concerns surrounding inflation pressures at the wholesale level, increasing the risk that pressures will feed through into consumer prices.
Key Data
13.30 Retail Sales (MoM) (Mar) Exp. 0.6% Prev. 0.3%
13.30 Retail Sales Control Group (Mar) Exp. 0.2% Prev. -1.2%