Soft Inflation Could Drop USD And GBP
UK CPI February data is paramount to the economic calendar in European markets. The inflation rate is forecasted to fall to 1.3%, compared to the last year. The rise in prices in UK have differentiate from the relevant forecasts in the past months. This indicates that the inflation has been over estimated by the economists’ models, and could be an introduction to a negative surprise. The interest rate hike bets of Bank of England, which are relying on the British Pound, could be depressed even more by such a scenario.
The early set of Eurozone PMI numbers for March suggest the same. The index that represents the whole 19 countries region is predicted to indicate the increase in the levels of growth in the service and manufacturing sector. This would be the fourth month in a row with the same acceleration in the pace of the growth. This outcome is not likely to give a lot through the continuous volatility of the Euro, since the short-term policy of the European Central Bank is not that much impacted.
The US CPI report was the highlight later that day. The 1.7% rise of core measure, compared to the last year, is at the highest level in the past three months. Inflation data in United States, much like in the United Kingdom, has been much lower relative to expectations since the middle of last year. Providing the trend continues, a soft result may be installed. This likely scenario could result in the discouragement of the speculations of Federal Reserve tightening, thus weakening the US dollar.
The currency that outperformed in overnight trade was the Japanese Yen. On average, it rose 0.2% against its main rivals. This seems to have been caused by the haven flows in the middle of the declining risk appetite. Part of the negative inclination, of MSCI Asia Pacific regional benchmark equity index, that was traded, seems to come from the discouraging results of HSBC Chinese Manufacturing PMI. The March results indicate the unexpected factory sector activity, contracted at the record pace in 11 months.