GBP

Sterling gathered major momentum against a broadly weaker dollar overnight. The pound gained over a cent amid improved market sentiment and falling US treasury bond yields. Higher than expected inflation data which leapt to its highest level since March 1992, increasing pressure on the Bank of England to raise interest rates at their May meeting also underpinned the pound. Sterling also improved against the euro, gaining around half a cent on the day. The focus of trader’s attention today will be the European Central Bank meeting. The Office for National statistics (ONS) reported yesterday that despite soaring inflation, the average property price in the UK rose by 10.9% over the year to February up from 10.2% in January. However, this morning’s Royal institute of Surveyors (RICS) monthly survey showed the number of new homes listed for sale rose in March for the first time in a year, potentially taking some heat out of surging house prices.

EUR

The euro’s fortunes rebounded against the dollar in US trading, with the single currency gaining nearly a cent ahead of today’s European Central Bank policy meeting. Although the market is not anticipating any interest rate changes today, the central bank might opt to end its bond buying stimulus programme sooner than expected, giving them the flexibility to raise rates possibly in the third quarter. Following the policy announcement, traders attention will turn to the press conference which follows and will be looking for a “hawkish” tone from ECB President Christine Lagarde to continue support for euro.

USD

The greenback weakened against its major rivals yesterday, with the dollar index falling from a two-year peak as US treasury yields corrected from their recent highs. The benchmark 10-year treasury yield had steadily risen this month, driven by expectations of Federal Reserve Bank monetary policy tightening to combat inflation. However, with this week’s inflation data coming in largely as expected, traders have had to reassess whether the central bank will be as aggressive as recently thought. Retail sales data released later today will be scrutinised to see if consumers have defied the recent price rises helping the Fed to continue its policy tightening.

Economic Calendar

12.45 EUR ECB Monetary Policy Statement
13.30 EUR ECB press conference
13.30 USD US retail sales