Daily digest market movers: Pound Sterling stays on sidelines, following US Dollar’s footprints
- The Pound Sterling turns sideways after recovering to 1.2660 against the US Dollar as investors shifted focus to the United States Consumer Price Index (CPI) data for March, which will be published on Wednesday.
- US Monthly headline and core inflation, which strips off volatile food and energy prices, are both forecasted to have risen at a slower pace of 0.3% from 0.4% in February. In the same period, economists expect the annual headline CPI to accelerate to 3.4% from 3.2%, while the core inflation is anticipated to decelerate to 3.7% from 3.8%.
- The inflation data will provide cues about when the Federal Reserve will start reducing interest rates. Currently, market expectations lean towards the June policy meeting for the Fed pivoting to rate cuts. However, upbeat US Nonfarm Payrolls (NFP) data for March has shaken the confidence of investors. Strong labor market data has strengthened the inflation outlook, allowing Fed policymakers to avoid consideration for rate cuts for now.
- On the United Kingdom front, the speculation for the Bank of England lowering interest rates from the June meeting has escalated. UK’s inflation came in below expectations in the first two months of this year. Also, BoE Governor Andrew Bailey said two or three rate cut expectations this year are “reasonable”.
- A significant fall in the UK inflation is majorly driven by weak consumer spending. The British Retail Consortium (BRC) reported on Tuesday that robust spending on food items boosted Retail sales in March. Demand for food items rose due to early Easter but the broader picture remains subdued as wet weather dented sales of other goods.
- Meanwhile, the UK economic outlook improves as large businesses see economic uncertainty easing ahead. A survey by audit and consultancy firm Deloitte said that uncertainties driven by Brexit, the pandemic, and inflation that have clouded the business scene for much of the last eight years “seem to be clearing."
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