US inflation data came in slightly less than expected

Daily Currency Update

In Europe we will see the release of the Harmonised Index of Consumer Prices (HICP) at 10am today. The core rate is expected to drop from 3.3% to 2.9% year on year. This data release will be instrumental for the European Central Bank in deciding whether they are going to reduce interest rates in April, or indeed if they wait until their June meeting. Should the figure fall short of expectations then an April interest rate cut may be on the horizon which could weaken the euro.

In the UK the next key event will be the Government’s budget announcement on March 6th. It is expected that tax cuts could offer some support to the Pound. The tax cuts are expected to be limited given the small amount of wriggle room the Chancellor, Jeremy Hunt, will have. The Bank of England will digest the data ahead of its next interest rate decision.

Yesterday’s Personal Consumption Expenditure (PCE) Inflation data in the US came in slightly less than expected and in turn led to a weaker US Dollar, but this proved temporary as markets shrugged it off. The markets still anticipate 75 basis points of interest rate cuts in 2024.