United States Dollar: UK CPI printed weaker than market forecasts yesterday, showing that the UK inflation rate dropped to zero in February and below the 0.1% expected level. The big contributors to the soft reading were downward pressures on food, furniture and computer equipment prices. The pound immediately weakened on the news and GBP/USD dropped from 1.4950 to 1.4902. The report continued to weigh on GBP/USD throughout the day yesterday and the pair fell to a low of 1.4835 by the end of the day. Although, it wasn’t particularly good news for the pound, the soft CPI reading shouldn’t come as too much of a surprise to investors as the Bank of England have forecasted that the inflation rate will fall below zero in the coming months, although they say it’s set to be driven by temporary factors. Later in the day, US CPI was released and printed as expected at 0.2% for February. The core reading was the same and a little stronger than market expectations but the reaction in the dollar was a bit mixed. The greenback then firmed up later in the day in reaction to a solid Richmond Manufacturing Index and strong New Home Sales. For this reason, GBP/USD trades towards the lower end of its recent range this morning at 1.4875.
We expect a range today in the GBP/USD rate of 1.4800 to 1.4930
Euro: European PMIs printed generally stronger than market forecasts yesterday and gave the single currency a bit of a boost. All indices for French, German and European Manufacturing and Services printed above the 50.0 level, indicating industry expansion, with both German Flash Manufacturing and European Flash Services PMIs coming in stronger than market forecasts. EUR/USD pushed through 1.10 on the news and traded to a high of 1.1028. Then, as the dollar strengthened throughout the afternoon, EUR/USD fell back and dropped to an eventual low of 1.0890. GBP/EUR has continued to drift lower in the background – a reaction to the weak UK inflation data – and it opens this morning at 1.3560.
We expect a range today in the GBP/EUR rate of 1.3520 to 1.3610
Aussie and Kiwi Dollars: NZ trade data printed weaker than market forecasts overnight as data showed that February’s trade surplus was only +$50mio vs. and expected +$350mio with a fall in dairy exports (to China) and prices being the main contributing factors. The kiwi fell on the news and dropped to an overnight low of .7604. It’s pulled back in early Europe though, to open this morning at .7645. AUD/USD has been flat by comparison and although it did react a bit to the US data yesterday, has traded a narrow range overnight between .7845 and .7890. GBP/AUD and GBP/NZD are both lower, largely as a result of yesterday’s weaker than expected UK inflation number and they trade at 1.8875 and 1.9450 respectively.
We expect a range today in the GBP/AUD rate of 1.8800 to 1.8950
We expect a range today in the GBP/NZD rate of 1.9350 to 1.9510
AUD: No data
EUR: German Ifo Business Climate
GBP: BBA Mortgage Approvals
NZD: No data
USD: Core Durable Goods Orders m/m, Crude Oil Inventories
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