In the European session, the USD started in the green, however continued its decline after the Fed indicated at last week’s FOMC meeting that a rate liftoff may not occur as quickly as the market once expected coupled with comments from Mester and Bullard this morning, who deviated from their usual hawkish tilt. Furthermore, Mester signalled that the Fed are equipped with easing tools should the US economy unexpectedly slowdown, however she did warn that she does not expect that to happen. Meanwhile, analysts at HSBC state that the USD is nearing the end of its bull-run and add that historically the move was overdone. Weakness in the USD came to the benefit of EUR/USD where the pair broke above 1.0900 and trade higher by over a point. Elsewhere, GBP/USD underperforms the major pairs with further uncertainty regarding the upcoming UK General election in May continuing to gain traction with the latest Populus poll showing Labour cutting their slight lead to 2 points against the Conservatives, while tomorrows CPI reading vs. Exp. 0.1% (Prev. 0.3%) is expected to get ever closer to deflationary territory with GBP weakness partially attributed to positioning ahead of the release.
Looking ahead, tomorrow provides a loaded data slate with French, German & US Manufacturing PMI’s alongside US & UK CPI, with close attention particularly on the inflation numbers as both central banks are focusing on these data points to justify a rate hike in the coming year.
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After the US close, it’s the Tokyo CPI
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