GBP

The pound remains under pressure against the euro, but steady against the dollar in early trading. It showed little reaction to data released this morning, which showed that the economy grew more quickly than previously thought in the last 3 months of 2021. Gross Domestic Product (GDP) increased by 1.3% in the fourth quarter of 2021 from the previous three-month period, above the forecast of 1.0%. That represented an acceleration from the economy’s 0.9% growth in the third quarter but was well below its 5.6% expansion in the April-June period of last year when it was rebounding from COVID-19 lockdowns. This morning also saw the release of the Nationwide housing prices monthly survey. The mortgage lender said house prices increased by 1.1% in March and were 14.3% higher than they were a year ago. However, they predicted that the market was likely to slow in the months ahead as the cost-of-living squeeze takes hold.

EUR

The euro has consolidated its recent advances against its major currency pairings. The single currency has held at a one month high against the dollar and has hit fresh 2022 highs against sterling. Optimism over Tuesday’s Russia-Ukraine peace talks had created demand for the euro, but it was given an additional boost from inflation data released yesterday. The preliminary data for March showed that Germany’s inflation rate rose 7.3% on an annual basis – a 40-year high, and Spain’s Consumer Price Index showed prices rising at their fastest pace since 1985. European Central Bank’s President Christine Lagarde spoke on the inflation outlook following the readings at an event hosted by the Bank of Cyprus. Her view is that food and energy prices should stop increasing, helping the euro zone avoid the combination of stagnant growth and high inflation feared by economists. ECB chief economist Philip Lane is due to speak later today.

USD

Although markets became hopeful of a diplomatic solution to the Russia-Ukraine conflict after Tuesdays talks, comments from the Kremlin that they had not noticed anything that could be assessed as “breakthrough” in negotiations and reports that Russia had intensified military strikes on Chernihiv despite promises to de-escalate attacks, has forced traders to become more cautious and created some demand for the dollar. Later today, the Personal Consumption Expenditures Price index (PCE), the Federal Reserve Bank’s preferred gauge of inflation, for February will be released.

Economic Calendar

10:00am EUR ECB’s Lane Speech
11:00am EUR ECB’s De Guindos Speech
13:30pm USD Core Personal Consumption Expenditures (MoM) (Feb)
13:30pm USD Initial Jobless Claims