Previous Day's Market Highlights
According to data out yesterday, UK inflation slowed more than expected in February, from 3.0% in January to 2.7%; as a result, sterling initially eased back, since lower inflation puts less pressure on the BoE to hike interest rates. Sterling-dollar briefly fell below 1.40 but otherwise largely traded around the key level, while sterling-euro reversed the inflation-driven dip to regain 1.14 as the euro softened. Euro-dollar reversed yesterday’s gain above 1.23.
As for the day’s other releases, a slowdown in Economic Sentiment in both the Eurozone and German ZEW Surveys contributed to euro softness, despite a small pick-up around the Consumer Confidence release, which was better than forecast. A decline in the Global Dairy Trade Price Index contributed to general kiwi weakness in the afternoon session.
The Canadian dollar strengthened on reports that the US had dropped a proposal on auto content, which removes one roadblock from NAFTA talks. The sterling-loonie rate fell back below 1.83 in overnight trading.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
First up today is the UK’s latest wage and employment figures. A pick-up in Average Earnings could see some additional sterling strength (09:30 GMT), although gains may be capped unless there are any positive surprises in the data. Any disappointment in the figures, particularly in wage growth, poses a risk to the downside.
As for the main event of the day: The Fed is widely expected to hike interest rates by 25 basis points to a target range of 1.50% to 1.75% this evening. According to the CME FedWatch Tool, markets are pricing in over a 94% chance of a move, which means that the dollar has already seen the benefit from this move. That leaves attention on Fed Chair Powell’s guidance.
While the Fed has been projecting three hikes this year, recent hawkish comments have led some investors to speculate that there could be as many as four. An upbeat assessment of the economy or more direct signals that the Fed sees rates rising higher than previously expected could strengthen the dollar. The greater risk may be that market expectations are disappointed, and the dollar instead eases off, despite the hike.
Elsewhere, US data in the afternoon session are mostly mid-level and will likely have limited impact as markets await the Fed decision, but a pick-up in the housing data could contribute to some general dollar strength. The Reserve Bank of New Zealand is expected to keep interest rates on hold at 1.75% after Q4 GDP and CPI disappointed.
Today's Economic Calendar
|09:30||GBP||ILO Unemployment Rate 3M (Jan)||4.4%||4.4%|
|09:30||GBP||Average Earnings Inc Bonus 3M/Yr||2.6%||2.5%|
|09:30||GBP||Average Earnings Excl Bonus 3M/Yr||2.6%||2.5%|
|09:30||GBP||Claimant Count Change (Feb)||-5.0K||-7.2K|
|09:30||GBP||Public Sector Net Borrowing (Feb)||£0.00B||£-11.62B|
|12:30||USD||Current Account (Q4)||$-125.0B||$-100.6B|
|14:00||USD||Existing Home Sales MoM (Feb)||5.40M||5.38M|
|14:30||USD||EIA Crude Oil Inventories (16 Mar)||3.182M||5.022M|
|18:00||USD||Fed Interest Rate Decision||1.75%||1.50%|
|18:00||USD||Fed's Monetary Policy Statement|
|18:30||USD||Fed Press Conference|
|20:00||NZD||RBNZ Interest Rate Decision||1.75%||1.75%|
|00:30||AUD||Unemployment Rate s.a. (Feb)||5.5%||5.5%|
|00:30||AUD||Employment Change s.a. (Feb)||20K||16K|