Dollar To Push Pound & Euro Lower Says Top Forecaster

Pound Sterling recovers against US Dollar

The Pound Sterling (GBP) extends its upside to $1.2650 against the US Dollar in today's London session as the latter faces profit-taking after refreshing monthly highs. The GBP/USD pair exhibits a sound recovery even though investors expect that the Bank of England (BoE) will be more dovish this year than previously anticipated, driven by lower-than-anticipated inflation data in January and February. The GBP/USD pair discovers some buying interest as the US Dollar corrects after printing a fresh monthly high. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, falls to 104.16. The USD Index corrects as expectations for the FED reducing interest rates in the June policy meeting increases as policymakers still have faith inflation is easing.

No Major Data

Euro-Dollar scope for relief this week says city index

European Central Bank (ECB) doves are continuing to reiterate the message that consensus within the Governing Council is shifting to imminent easing. Fabio Panetta said recent weeks have seen growing support for rate cuts in the GC, and that inflation is moving closer to the ECB target. Chief Economist Philip Lane sounded optimistic that the normalisation in wages – a necessary condition for cuts – is proceeding and signalled that the ECB has made “good progress” on disinflation. Despite more cautious messages by other ECB members in the past few days, there are clear indications that the Bank is prepared to cut rates this summer and that June remains the most likely meeting, as policymakers will want to see more convincing evidence on wages and inflation. Inflation numbers will be released in the next ten days in the Eurozone, with the EZ-wide March CPI estimate released on 3 April. Barring major surprises, markets should continue to gain confidence about a June cut (21bp already in the price), meaning that the EUR may lag other currencies that have short positioning and/or have higher beta to sentiment once a Dollar decline materialises. EUR/USD trades lower than its last week barrier of $1.0950 currently trading at $1.0852.

Data:

Spain Gross Domestic Product (YoY)(Q4): 2%

ECB's Lane Speech: 22:30pm

GBP/USD exchange rate forecast: FED speeches in focus

Looking ahead for the US Dollar, a series of Federal Reserve officials are due to speak in the short term. On Wednesday, Federal Reserve Governor Christopher Waller is due to deliver a speech. As Governor Waller is one of the more hawkish officials amongst the Fed, any calls for delayed interest rate cutting could lift the ‘Greenback’ against its peers. Elsewhere, risk appetite is likely to play a role in shaping the US Dollar in the short term, due to a lack of other data releases. For the Pound, meanwhile, data releases in the short term are set to dry up, which is likely to leave the increasingly risk-sensitive currency exposed to shifts in the market mood. As such, if levels of risk appetite begin to recede Sterling may weaken against safer peers such as the US Dollar. However, if trading conditions improve and risk appetite increases, the Pound may gain ground as investors seek out riskier assets.

Data:

House Price Index (MoM)(Jan)

Consumer Confidence