11/03 – EUR in focus as ECB meets

GBP: Staying solid without much guidance

EUR: ECB press conference at 1.30pm

USD: Weaker CPI limits USD strength

Sterling

Sterling really has had very little to offer in recent days and that should continue today. GBPUSD is being driven by the USD side of the equation with yesterday’s weakness helping the pair back above the 1.39 mark. Similarly, GBPEUR has been waiting for the ECB meeting this afternoon for a sense of direction but remains close to its year-to-date highs.

Euro

It’s European Central Bank day and with it comes a focus that the euro does not want or need at the moment. Consensus expectations indicate that the ECB won’t extend the amount of support it is offering the European economy and that its concerns over a lack of inflation within the Eurozone stem from a paucity of fiscal support unlike what has been agreed and enacted in the US and UK in recent times.

Conversations from the ECB that they are in need of controlling bond yields will likely send the euro lower throughout the session, especially if markets decide to test that resolve. The policy announcement is due at 12.45 GMT with ECB President Lagarde due to speak at 13.30.

US dollar

A weak inflation figure yesterday has bolstered the narrative, rightly or wrongly, that inflation is going to be hard to come by in the US for a while, with the dollar slipping as a result. The Federal Reserve will not be unhappy with this and will hope that in concert with an auction of US debt that went as planned, unlike the most recent one, that some of the wilder swings in US debt markets may be coming to an end.

This could in turn lead to a less aggressive dollar and a wider rebound in commodity currencies.

Clarification may come from Friday’s PPI number which is the best sign of rising prices at the factory gate.

Elsewhere

The Bank of Canada meeting yesterday added little to the market’s knowledge of future trade of the loonie. We do expect that positive pressure may be seen however as we head into the April meeting alongside a belief that Canada could be the first central bank to taper its support for the wider economy. In the meantime, oil prices will keep the CAD supported.

Market rates

Today’s interbank rates at 08:19 against sterling. Movement vs yesterday.

Euro€1.167 ↑
US dollar$1.394 ↑
Australian dollar$1.793 ↓
South African randR20.77 ↓
Japanese yen¥151.4 ↑

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.