Markets await key Eurozone and US inflation data
Friday 31 March, 2023
Daily Currency UpdateGBP/USD briefly traded above 1.24 overnight as rising stock markets and a slight downward revision to US Q4 GDP helped weaken the dollar. This morning we have seen growth data from the UK revised upwards. The final reading for Oct-Dec 2022 was revised upwards to 0.1% growth from its previous estimation of zero. The report from the Office for National Statistics confirmed the economy is 0.6% smaller than it was before the Covid-19 pandemic however it should be noted that the current economic picture is a lot better than many were predicting late last year. With little domestic data due for the rest of the day sterling's value will likely be dictated by inflation numbers from the Eurozone and US. GBP/USD is back down to 1.2360 with GBP/EUR at 1.1360.
Key MoversAfter a relatively quiet week, today sees some key releases from both the Eurozone and the US. First up we have the March flash inflation reading from the EZ. The overall level of CPI is predicted to have fallen to 7.1% from 8.5%. Markets will likely be paying more attention to the core reading which strips out the volatile costs of food and fuel. This is expected to tick higher to 5.7% from 5.6%. The European Central Bank and EZ citizens alike will hope for a surprise undershoot to ease the consumer spending squeeze seen in the bloc. Later on, in the day we have February's Personal Consumption Expenditure data from the States. PCE is another gauge of inflation more focused on consumers which the Federal Reserve pays particular attention to. Last month saw an unexpected rise in PCE, prompting Jay Powell to warn policymakers in Washington that the US should expect higher interest rates to fight persistent inflation. This in turn sent shockwaves through financial markets and was likely a factor that saw several US banks collapse. On the back of this, we should expect the extra focus to be drawn to today’s number. On an annualized basis the overall level of PCE is expected to drop from 0.1% to 5.3% with the core number holding steady at 4.7%. As is often the case the dollar is gaining on market jitters ahead of the data with EUR/USD back down to 1.0870.
- GBP/USD: 1.2280 - 1.2450 ▼
- GBP/EUR: 1.1280 - 1.1440 ▼
- GBP/AUD: 1.8420 - 1.8600 ▲
- EUR/USD: 1.0800 - 1.1000 ▼