The pound is mixed this morning, dropping against the broadly stronger euro, but gaining against the dollar as Bank of England official Andrew Sentance signaled he voted for a half point interest rate increase last week. Mr. Sentence said to Sky News yesterday that the financial markets expect for the BoE’s benchmark rate to climb to 2% next year. Looking ahead to this week, the consumer price index headlines the economic calendar, with the expectations for the annual rate to remain at 4.4% in March. Also scheduled for this week is the trade data released on Tuesday, labour market statistics and the RICS and the BRC retail surveys. In addition, several MPC members are due to give speeches this week, however it is unclear whether they will give any comments on the UK monetary policy. Expect for the pound to remain driven by the inflation release scheduled for Tuesday.
The euro remained strong against most of its major rivals during the weekend, although the single currency consolidated slightly against the dollar on concern Europe’s debt crisis may intensify. German Finance Minister Wolfgang Schaeuble warned that Greece might need more financial relief, just a few days after Portugal asked for an 80 billion euro aid package. The euro gained against all of its most traded counterparts after the European Central Bank raised its base rate by 25 basis points to 1.25% on April 7. Looking ahead to this week consumer price index figures headline the economic calendar, and this data will give us more clues whether the ECB will act again in June.
The dollar remain subdued against its major rivals ever since the March FOMC (Federal Open Market Committee) Monthly report showed that policy members remain dovish on the interest rate outlook and do not plan to exit quantitative easing program. Looking ahead to this week, the US markets are also focusing on the consumer price data scheduled for this Friday. The March CPI figure is expected to have increased by 0.2%, pushing the annual rate to a 1.3%. Expect for the greenback to remain under pressure against its major rivals for as long as US policymakers continue to hold financial stimulus on and to keep interest rates unchanged at 0.25%.
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