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US CPI to hold headlines

Daily Currency Update

European month-on-month retail sales figures met the forecast -of 0.8% yesterday. In February 2023, the seasonally adjusted volume of retail trade decreased by 0.8% in the euro area and by 0.9% in the EU, compared with January 2023. The news offered no surprises and was recognized by market participants as a low-impact data release, which it was. The only other notable economic release yesterday came from FOMC Member Harker, who spoke at an event hosted by Wharton Business School, in Philadelphia. The only sound bites taken away from his address were that he expects US economic growth to be under 1% this year and that the Fed may soon be done raising interest rates, but the central bank is committed to bringing inflation down from its elevated levels. GBP/USD has maintained its gains above 1.2400 and touched 1.2450 just before midday Tuesday. GBP/EUR has seen a steady decline since the retail sales figures but traded again within recent ranges (1.1370 – 1.1410).

This week’s first set of key data releases is being released today. The US CPI index for March will gauge just how sticky prices are likely to be and thus the likely response from the Federal Reserve. The general perception is that the Fed is near the end of its aggressive rate-hiking cycle, but there may still be room for another increase in May when the policymakers next get together. Core inflation, which excludes volatile food and energy prices, is expected to rise 0.4% on a monthly basis and 5.6% year-over-year in March. Any increase in these inflationary figures could change the Fed’s sentiment on ending interest rate hikes and add volatility to the US dollar movement.

Key Movers

Along with today US CPI data, we will also see the minutes of the FOMC meeting in March and Bank of England governor Andrew Bailey is due to speak about financial and price stability at the International Monetary Fund Spring Meetings, in Washington DC. The FOMC meeting minutes will be following the US inflation report to add further volatility to the US dollar, especially if the recent inflation figures are far from forecast. Andrew Baileys comments will be scrutinised for any clues on future monetary policy. Due to this, volatility in GBP and USD should be seen into tomorrow which is also another data heavy day – UK GDP at 7am, US PPI and unemployment claims at 1:30pm.

Expected Ranges

  • GBP/USD: 1.2350 - 1.2490 ▲
  • GBP/EUR: 1.1330 - 1.1460 ▲
  • GBP/AUD: 1.8590 - 1.8810 ▲
  • EUR/USD: 1.0770 - 1.0990 ▲