Euro on the front foot

The euro has been on the front foot since last Thursday’s ECB meeting and press conference, at which Mario Draghi said the risks to the economic outlook in the Euro area had become less pronounced and any need for additional stimulus had diminished. Reports circulated on Friday that the ECB also had a ‘cursory’ discussion on Thursday about the possibility of raising interest rates, specifically the deposit rate, before QE ends (though the ECB’s current forward guidance states that rates will remain unchanged or lower until after QE ends)

The single currency traded up to a high of around $1.0715 against the dollar overnight and is just a little lower this morning. It has also strengthened against sterling, gaining almost a penny since last Thursday to trade at around 87.5p. Reports over the weekend that UK MP Theresa May is preparing to trigger Article 50 tomorrow has had little impact on sterling

Employment in the US rose strongly again in February (+235,000), the unemployment rate nudged lower (to 4.7%) and annual earnings growth picked up (to 2.8%). This bolsters the case for a 25bps rate hike at this week’s Fed meeting (Tue & Wed)

The Bank of England is expected to leave interest rates unchanged at its meeting this week (announcement on Thursday), amid some signs of an easing in the pace of growth

Data due this week include CPI and retail sales in the US and the latest labour market report in the UK. The market will also be focusing on the Dutch election on Wednesday