Time For The Euro To Move Lower?
Sterling advances following yesterday's budget
Investors hope that the Bank of England will start reducing interest rates after the Federal reserve, creating some Sterling support this morning. They are expecting the rate cuts by the BoE and the Fed to be implemented in the June and August policy meetings, respectively. Aside from the BoE interest rate expectations, the announcement of the scope of fiscal stimulus in the United Kingdom's budget for 2024 has also strengthened the Pound. With the Chancellor of the Exchequer, Jeremy Hunt, stating that the UK administration intends to reduce public sector net debt and budgetary deficit while supporting economic growth. Looking ahead, the UK's average earnings data for the three months ending in January, which will be published early next week, will provide a fresh outlook on inflation. No Major Data
EUR: Three things to watch at today's ECB meeting
The Euro rally has paused ahead of ECB today. The European Central Bank will announce monetary policy decisions and publish the revised macroeconomic projections later on today. There are three key factors to watch: staff projections, communication and the conditionality for a June cut. The biggest driver will likely be the ECB shifting to more of a balanced risk position on inflation and/or bringing forward the timing of a return to the 2% target, potentially creating some Euro downside risk.
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Data: Main Refinancing Rate, Monetary Policy Statement, ECB Press Conference
USD: Powell, round two
The Dollar softened across the board yesterday following both Fed chair Powell's remarks and the softer Quits rate number. Chair Powell will deliver the second leg of his testimony to the Senate. In the past, Fed Chairs have used the second leg to correct any market overreaction to the first leg. However, markets doubt Powell will have too many issues with modest risk rally that yesterday's testimony delivered, and he should present a similar message today. Markets doubt the US data will move the Dollar too much today and instead, investors are waiting to see if tomorrows NFP job release will correct lower from the strong gains in January and December.
Data: Fed Chair Powell testifies