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US Dollar, Pound May Fall as Soft Inflation Dents Rate Hike Bets

US Dollar, Pound May Fall as Soft Inflation Dents Rate Hike Bets

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar, British Pound May Fall as Soft CPI Figures Dent Rate Hike Bets
  • Limited ECB Policy Impact to Contain Euro Follow-Through on PMI Data
  • See Economic Releases Directly on Your Charts with the DailyFX News App

February’s UK CPI data headlines the economic calendar in European trading hours. The core year-on-year inflation rate is expected to slip to 1.3 percent. UK price-growth data has increasingly disappointed relative to consensus forecasts over recent months, suggesting economists’ models are over-estimating inflation and opening the door for a downside surprise. Such an outcome may further depress Bank of England interest rate hike bets, weighing on the British Pound.

The preliminary set of March Eurozone PMI figures is likewise on tap. The region-wide composite index is expected to show the pace of manufacturing- and service-sector activity growth accelerated for a fourth consecutive month. The outcome seems unlikely to offer much by way of lasting Euro volatility however considering the results’ limited impact on the near-term ECB policy outlook.

Later in the day, the spotlight moves to the US CPI report. The core measure is seen rising to 1.7 percent year-on-year, marking a three-month high. Similarly to the UK however, US inflation data has increasingly underperformed relative to expectations since mid-2014 however. If that trends continues, a soft result may be in the cards. Such an outcome may pour cold water on Fed tightening speculation, pushing the US Dollar downward.

The Japanese Yen outperformed in overnight trade, rising as much as 0.2 percent on average against its leading counterparts. The move appears to have reflected haven flows amid ebbing risk appetite. The MSCI Asia Pacific regional benchmark equity index traded, with at least some of the negative mood seemingly stemming from a disappointing HSBC Chinese Manufacturing PMI data. The report showed factory-sector activity unexpectedly contracted at the fastest pace in 11 months in March.

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Asia Session

GMTCCYEVENTACTEXPPREV
22:30AUDANZ Roy Morgan Weekly Consumer Conf111.4-110.8
23:00AUDConference Board Leading Index (MoM) (JAN)0.4%-0.4%
1:35JPYMarkit/JMMA Mfg PMI (MAR P)50.452.051.6
1:45CNYHSBC China Mfg PMI (MAR P)49.250.550.7
2:00CNYConference Board Leading Econ Index (FEB)317.6-312.9
5:00JPYSmall Business Confidence (MAR)49.848.046.5

European Session

GMTCCYEVENTEXPPREVIMPACT
8:00EURMarkit France Composite PMI (MAR P)51.952.2Low
8:00EURMarkit France Mfg PMI (MAR P)48.547.6Low
8:00EURMarkit France Services PMI (MAR P)52.553.4Low
8:30EURMarkit/BME German Composite PMI (MAR P)54.153.8Medium
8:30 EURMarkit German Services PMI (MAR P)55.054.7Medium
8:30EURMarkit German Mfg PMI (MAR P)51.551.0Medium
9:00EURMarkit Eurozone Composite PMI (MAR P)53.653.3Medium
9:00EURMarkit Eurozone Services PMI (MAR P)53.953.7Medium
9:00 EURMarkit Eurozone Mfg PMI (MAR P)51.551.0Medium
9:30GBPCPI Core (YoY) (FEB)1.3%1.4%High
9:30GBPCPI (YoY) (FEB)0.1%0.3%High
9:30GBPCPI (MoM) (FEB)0.3%-0.9%High
9:30GBPRPI (FEB)256.6255.4Low
9:30GBPRPI (YoY) (FEB)0.9%1.1%Low
9:30GBPRPI (MoM) (FEB)0.4%-0.8%Low
9:30GBPRPI Ex Mort Int.Payments (YoY) (FEB)1.0%1.2%Low
9:30GBPPPI Input n.s.a. (MoM) (FEB)1.6%-3.7%Low
9:30GBPPPI Input n.s.a. (YoY) (FEB)-12.3%-14.2%Low
9:30GBPPPI Input n.s.a (YoY) (FEB)-2.0%-1.8%Low
9:30GBPPPI Output n.s.a. (MoM) (FEB)0.0%-0.5%Medium
9:30GBPPPI Output Core (MoM) (FEB)0.1%0.2%Medium
9:30GBPPPI Output Core (YoY) (FEB) 0.4%0.5%Medium
9:30GBPONS House Prices (YoY) (JAN) 8.9%9.8%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.04891.06921.08191.08951.10221.10981.1301
GBPUSD1.46251.47761.48641.49271.50151.50781.5229

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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