Euro a little softer
It remains relatively quiet in FX markets with the main currency pairs not much changed. The euro is a touch weaker against both the dollar and sterling following dovish ECB comments, trading at $1.08 and 85.6p respectively this morning, while the pound is a little lower against the dollar also trading just north of $1.26.
Sovereign bond yields edged down a bit further yesterday with German 10-year yields falling by around 6bps and equivalent US and UK yields down around 4bps. In equity markets, the S&P 500 staged a late rally to close almost 1% higher while European stocks gained around 0.4%.
ECB member Cipollone says increasing confidence in the Euro area inflation outlook means the central bank “should stand ready to swiftly dial back our restrictive monetary policy stance,” noting that “in the current environment lower inflation and higher growth can be achieved simultaneously.”
Fed Governor, Christopher Waller, in contrast, says recent US inflation data “reinforces my view that there is no rush to cut the policy rate…indeed, it tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2%.” He does, though, “continue to believe that it will be appropriate to begin reducing rates this year.”
Meanwhile, Bank of England MPC member Haskel, who had been calling for a rate hike up until last week’s monetary policy meeting, says surveys of businesses show that wage growth remains too high and is likely to ease only slowly, meaning rate cuts are likely to be “a long way off.” Separately, data released earlier this morning confirmed that the UK economy contracted in the final quarter of last year, with GDP falling by 0.3% (unrevised from the previous estimate) after declining by 0.1% in Q3.
Economic data due today include Euro area money supply & credit growth and US GDP (final estimate for Q4’23), consumer confidence (final reading for March), and the regular weekly jobless claims. There are couple of Fed speakers, including Powell, due on the wires.