Sterling was able to secure a tentative recovery on Friday with some reassessment of the Bank of England policy decision. Although the statement was less hawkish than expected, there were still expectations that there would be further rate hikes which would underpin short-term yield spreads, especially against the yen low-yielding currencies. CFTC data recorded an increase in short, non-commercial Sterling positions to over 29,000 contracts in the latest week from 12,500 the previous week and the largest short position for over two months. The positioning will give scope for short covering if there is a net boost to Sterling sentiment. There will be some caution ahead of Wednesday’s Spring budget statement from Chancellor Sunak with expectations that fuel duty will be cut to ease immediate upward pressure on prices. Rightmove data on house prices remained strong with a further 1.7% increase for February with the housing sector still strong.
No Key Data
The Euro was unable to make any headway ahead of Friday’s New York open with no positive developments surrounding the Ukraine conflict. CFTC data recorded a sharp decline in long, speculative Euro contracts to fewer than 19,000 contracts from near 59,000 the previous week. ECB council member Holzmann again backed his call for a potential interest rate hike before ending bond purchases while fellow council member Knot stated that a rate hike was realistic this year. The Euro was unable to make headway on Monday amid unease over the Euro-zone growth outlook. There was no progress in Russia/Ukraine peace talks which dampened potential Euro support.
Key Data
7.30 Christine Lagarde Speech
Fed Governor Waller stated that the US economic data screams for a 50 basis-point rate increase, although geo-political concerns demand caution. He added that any policy norm would dictate that rates should be higher than we are today and added that data suggests the central bank will be moving towards a 0.50% rate hike at one or more of the upcoming meetings. The comments from Waller triggered renewed expectations of a more aggressive policy stance from the central bank which provided significant dollar support. Minneapolis Fed President Kashkari stated that he sees rates at 1.75-2.00% at year end. Richmond head Barkin stated that he was very open to a 50 basis-point hike in rates if inflation does not begin to settle. Markets indicated that the chances of a 50 basis-point hike in May were close to 50%.
No Key Data