Hesitant BoE to weigh on Sterling.
GBP to struggle as the BoE continues to merely react hesitantly - Commerzbank.
Economists at Commerzbank note that the GBP could struggle as the Bank of England continues to merely react hesitantly. “What is likely to be negative for Sterling is that the BoE continues to merely react hesitantly and might therefore risk its credibility when it comes to fighting inflation.”?“The market seems confirmed in its rate hike expectations following yesterday’s meeting. It is certainly pricing in at least one more rate hike step and with a slightly smaller likelihood even one after that. We see some potential for disappointment there.”?“In the end future data will be decisive for the BoE’s next rate decision though, in addition to the April inflation data the May data will also be published. If a swift fall were to become obvious here, as the BoE expects, it is likely to refrain from further rate hikes and that would put pressure on Sterling. However, the risk that the BoE will do more has certainly increased since yesterday.”
Eurozone consumers raise inflation expectations - ECB survey.
Eurozone consumers raised their inflation expectations in March, even as the rate of price growth fell and the European Central Bank kept raising interest rates, an ECB survey showed yesterday. The median respondent in the latest Consumer Expectation Survey saw prices growing by 5.0% in the coming 12 months, up from 4.6% in the previous survey round in February.?It was the first increase in inflation expectations since the autumn, an unwelcome development for an ECB that is trying to stop the current high rate of price growth from becoming entrenched.?The ECB slowed the pace of its interest rate increases last week but signalled more tightening to come in what markets expect to be the final stage of its fight against inflation.?Longer-term expectations also increased sharply, with inflation three years ahead now seen at 2.9% after a 2.4% reading a month earlier.?The CES is a monthly online survey of around 14,000 adults from Belgium, Germany, Spain, France, Italy and the Netherlands. It is one of the inputs used by ECB policymakers in their deliberations.
Dollar strengthens on mixed markets.
The Dollar rose yesterday on the back of cautious markets and a decline in commodity prices. The Greenback turned positive for the week with the DXY rising to the 102.00 area. US economic data pointed to a slowdown in inflation (Producer Price Index below expectations) and to a gain in the labor market (Initial Jobless Claims at highest since October 2021).?Wall Street posted mixed results on Thursday. The Dow Jones dropped 0.66% while the Nasdaq gained 0.18%. European stock markets also finished mixed. Equity prices continue to move sideways while the currency market appears on the verge of an extension of the recovery of the US Dollar. Elsewhere, the South African Rand hit a new all-time low against the dollar on Friday, extending steep losses from the previous day.?On Thursday the U.S. ambassador said he was confident that a Russian ship had picked up weapons in South Africa last year.?The U.S. assertion came at a time when investor sentiment towards South Africa had already badly soured over the worst power cuts on record that show no sign of abating.