GBP

The pound has been unable to benefit from inflation data released this morning, which showed consumer prices rising at their sharpest since 1992. The Office of National Statistics reported that the Consumer Price Index leapt to 7% in March, up from 6.2% in February, intensifying the cost-of-living squeeze faced by households. UK inflation has seen an unprecedented rise over the past year as energy prices surge and pandemic supply-chain difficulties persist, and financial markets now believe it is all but certain that the Bank of England will raise interest rates from 0.75% to 1% at their May policy meeting. Sterling showed little reaction to the news yesterday that Prime Minister Boris Johnson and Chancellor Rishi Sunak have been notified that they will be fined for breaking lockdown rules. Johnson will become the first sitting Prime Minister to receive a punishment for breaking the law, but defied calls to resign.

EUR

The euro hit a five-week low against the dollar overnight, hurt as prospects of a de-escalation in the Ukraine conflict receded. Russian President Vladimir Putin’s description of on-and off peace negotiations as “a dead-end situation weighed heavily on the single currency. The euro was further undermined by a poll in French Financial newspaper Les Echos, which showed Far-right candidate Marine Le Pen closing the gap with incumbent President Macron ahead of the second round of the country’s presidential election. With a lack of economic data due today for the bloc, geo-pollical news is likely to determine the euro’s fortunes.

USD

The dollar lost some ground after the release of US inflation data yesterday but managed to gain some traction following “hawkish“ comments from Federal Reserve Bank policymakers. Annual inflation data, as measured by the Consumer Price Index (CPI) jumped to a fresh multi-decade high of 8.5% in March, however the core CPI came in at 6.5%, slightly lower than economist consensus expectations of 6.8%. Following the data’s release, Richmond Fed President Thomas Barkin argued that the central bank should get up to levels where borrowing costs will no longer be stimulating the economy and Fed Vice Chairwoman Lael Brainard said that the reduction in the balance sheet could come as soon as June after announcing the decision at their next meeting. Brainard further added that the balance sheet run off could be worth “two to three additional rate hikes“ through its course. With a very light economic calendar today market sentiment should dictate the greenback’s movements.

Economic Calendar
No major releases