ECB's Turn after Fed Minutes Upbeat

The Fed minutes were relatively positive. Attention today is on the ECB meeting accounts and rising geopolitical tensions.

Previous Day's Market Highlights

Sterling hit highs against the dollar above 1.42 but lost ground after production figures declined or rose less than forecast and despite trade figures showing a narrower deficit than projected in February. Against the euro, the pound failed to regain the 1.15 handle but continued to hold above 1.14. Euro-dollar was little changed ahead of the Fed minutes but inched lower in the 1.23-1.24 band as the dollar gained on the Fed’s relatively upbeat tone.
 
The Fed minutes highlighted a strengthening economic outlook and expectations that inflation will hit the central bank’s 2% target rate. Investors will continue to keep an eye out for signs that price pressures are accelerating as they try to determine whether a fourth rate hike could be in the cards. The Fed has been projecting three hikes this year.

Earlier in the afternoon, US CPI figures were mixed as monthly inflation declined, while core and annual inflation firmed. However, the inflation releases were broadly in line with market expectations and had limited impact. Investors eyed rising tensions with Russia over Syria.
 
Oil prices, including both US WTI and Brent, rose to their highest levels since December 2014 as investors speculated tensions in the Middle East could disrupt production. The Canadian dollar hit its strongest levels against the pound since 12 March at around 1.78.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1470 1.1538 1.1269 2.33%
GBP/USD 1.4180 1.4245 1.3888 2.51%
EUR/USD 1.2362 1.2477 1.2218 2.08%
GBP/AUD 1.8299 1.8509 1.7708 4.33%
GBP/NZD 1.9232 1.9644 1.9033 3.11%
GBP/CAD 1.7858 1.8417 1.7817 3.26%

Today's Market Highlights

Attention today turns to the next batch of monetary policy meeting accounts, this time from the ECB (12:30 BST). Investors will closely parse the comments for clues that the ECB will definitely wind down QE this year, as some speculate it will do in September, and for any indications as to when it will start raising interest rates. Greater market attention may be paid to today’s accounts after Nowotny’s hawkish comments earlier in the week.
 
There are no major economic releases from the UK today. BoE Governor Carney isspeaking tonight at the Canada Growth Summit (19:00 BST), but the summit may have greater implications for the Canadian dollar unless UK monetary policy is specifically addressed.
 
The US releases weekly Initial Jobless Claims (13:30 BST), which are forecast to slip back down to 230K but in any cas are expected to remain well below the 300K level consistent with a strengthening labour market. This could see some dollar strength, but the release’s overall market impact will likely be limited with investors’ focus primarily on the latest trade headlines and geopolitical developments. Overall, rates may remain within familiar ranges today given the relatively quiet calendar.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP BoE Credit Conditions Survey
10:00 EUR Industrial Production s.a. MoM (Feb) 0.1% -1.0%
12:30 EUR ECB Monetary Policy Meeting Accounts
13:15 EUR ECB's Coeure Speaks
13:30 USD Initial Jobless Claims (6 Apr) 230K 242K
13:30 CAD New Housing Price Index MoM (Feb) 0.1% 0.0%
20:00 GBP BoE Governor Carney Speaks
22:00 USD Fed's Kashkari Speaks
03:00 CNY Trade Balance USD $27.87B $33.74B
03:00 CNY Trade Balance CNY 160.00B 224.88B

Caxton