Yesterday was a quiet day in terms of economic data. Bank of England (BoE) Deputy Governor Cunliiffe stated that the Ukraine crisis will intensify and prolong the surge in inflation and tighten the squeeze on household incomes. Cunliffe appears unlikely to back aggressive tightening from current levels. The overall rhetoric was broadly dovish, although this would have been expected to some extent given that he voted against the March rate hike.
Today’s economic data calendar is dominated by the March services surveys. The UK PMI services measures are second readings, although there will be new detail. The first updates saw the UK headline measure a rise to a nine-month high as the end of COVID-19 restrictions provided a further boost to activity.
Dollar Remains Elevated in Quiet Trading Period
The Dollar continued to trade at elevated levels at the start of this week as most major pairs struggled for direction during Monday’s trading and as financial markets continue to remain cautious ahead of the announcement of expected new US sanctions against Russia. A light economic calendar on Monday saw US factory orders fall by 0.5% month-on-month in February. The figure reported its first monthly decline since April 2021 as supply chain pressures and material shortages weigh on consumer demand. There was little market reaction following the announcement which was in line with expectations. Overnight, the Dollar Index continued to trade close to the 99.00 level, meanwhile, the benchmark US Treasury yield trades at 2.4%.
Looking ahead to today, investors will review the US ISM services data for March where an increase to 58.0 is expected. Elsewhere, markets will look to Federal Reserve (Fed) official’s comments, including Governor Brainard who is scheduled to speak as investors look for fresh clues over the pace and timing of rate hikes following robust jobs data announced at the end of last week.
ECB Member Knot Calls for Policy Tightening
It was a quiet day of economic releases on Monday which saw the Euro fall against the US Dollar and toward the two-year low level reached in March. The Euro faced pressure due to the mixed economic outlook across the bloc and rising inflationary pressures. The head of the Dutch central bank and European council member Klaus Knot commented yesterday that the ECB should act in the face of high inflation and a gradual normalisation of policy is required. He also cited that demand across Europe had recovered quicker than expected. Knot’s remarks follow last week’s data showing that Eurozone Consumer Price Index (CPI) inflation rates have risen to a record level of 7.5% as of March on an annual basis.
A quiet economic calendar today will see investors review March services data. The PMI Services reading is the second reading following a previous drop to a two-month low. Meanwhile, financial markets are likely to continue to follow geopolitical headlines for direction.
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