Eyes On Mid-Tier US Data & Fedspeak To Start Holiday-Shortened Week

BoE turns more dovish

Sterling is consolidating at slightly lower levels after the Bank of England's dovish bout of communications late last week. Thursday's dovish statement and minutes were backed up by an interview from Governor Andrew Bailey in the Financial Times on Friday. Here, he implied that multiple rate cuts would be coming through this year. That dovish turn from the BoE meant GBP/EUR can work its way slowly towards the €1.1495 area over the coming month. ING Bank's Dollar view, is that they are not too bearish on GBP/USD and would expect some decent demand to emerge under $1.2600.

Data:

14.15: BoE's Mann Speech

Mixed messages from the ECB

Despite EUR/USD being back at $1.0800, the European Central Bank's trade-weighted Euro has been doing reasonably well over the last month and is up around 1.5%. Looking at positioning amongst the speculative community, positioning is still net long Euro – although asset managers did chop around 10% of their Euro net longs in the latest reporting week.

Following last week's surprise cut from the Swiss National bank, there has been increased scrutiny on ECB communication. This remains mixed, with some talk of an April rate cut. Notably, money markets still ascribe a very low probability to such an outcome and we doubt that changes much this week given the absence of key data. EUR/USD remains fragile, but at least the steadier story for the Renminbi will discourage aggressive sales of EUR/USD through $1.0800.

Data:

10.00: ECB's President Lagarde Speech

People's Bank of China pushback softens the Dollar bull case

The stronger Dollar on Friday occurred where markets were speculating that the People's Bank of China (PBoC) might have taken a decision for one of its episodic bouts of CNY depreciation – a move which generally carries Asian FX with it and provides support to the Dollar globally. Fortunately, the PBoC has today pushed back against ideas of a CNY down-leg by delivering a stronger CNY fixing. There have also been reports of state banks selling Dollars – all pointing to the view that Chinese authorities prefer a stable Renminbi as it works through economic challenges at home. The support to the Renminbi has helped to limit Friday's advance of the Dollar, as has some quite aggressive verbal intervention in support of the Yen from Japanese officials.

Friday is a public holiday in many parts of the world but still features the key release of the week, the US core PCE deflator for March. There is a strong consensus behind a 0.3% month-on-month reading, which will not be good enough for the Fed's disinflation narrative. However, this week also sees quite a few Fed speakers. We would highlight the influential Christopher Waller speaking on Wednesday and Fed Chair Jerome Powell speaking on Friday. We want to hear if the Fed has more to say about faulty seasonals making early-year inflation prints look too strong.

Data:

14.30: Fed's Cook Speech