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What’s happening: The GBP/USD forex pair fell slightly on Monday, as investors awaited interest rate decisions from several major central banks.
What happened: Investors have recently remained cautious with central banks not being in a hurry to take interest rates lower.
Some strength in the US dollar also exerted pressure on the GBP/USD forex pair.
Why it matters: The British pound, which has been one of the top performing currencies this year, came under pressure last week. The GBP/USD forex pair lost around 1.2% in the week, mainly due to strength in the US dollar. The release of hotter-than-expected inflation data from the US raised prospects of the Federal Reserve keeping interest rates higher for longer and supported the greenback.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained slightly to 103.43 on Monday. The index has added approximately 2% in 2024.
The Bank of England is scheduled to announce its interest rate decision on Thursday, with markets expecting the central bank to hold rates at 5.25%. Inflation in the UK eased to 4% in January, versus 11.1% in October 2022. Data on CPI will be released on Wednesday, with analysts expecting the inflation rate to slow further to 3.5% in February.
The Bank of Japan’s interest rate decision is due on Tuesday. The BoJ is widely expected to raise interest rates after maintaining negative rates for eight years. The Fed will begin its two-day policy meeting today and is scheduled to announce its policy decision on Wednesday.
Investors will also focus on economic projections by these central banks.
The GBP/USD forex pair edged lower to 1.2728 on Monday, while the EUR/GBP forex pair lost around 0.1% to 0.8542. London’s FTSE 100 fell 0.06% to close at 7,722.55, while the FTSE 250 Index declined 0.14% to 19,486.53.
What to watch: Investors await the release of economic reports on inflation rate, producer price inflation and retail price index from the UK today. Factory gate prices of goods produced by UK manufacturers, which declined by 0.2% in January, are expected to increase by 0.1% in February.
Analysts expect the UK’s Retail Price Index to decelerate to 4.5% year-over-year in February, from 4.9% in the previous month.
Context: European markets closed slightly lower on Monday, ahead of the US Federal Reserve’s policy meeting.
Details: The Fed will start its policy meeting on Tuesday and is scheduled to announce its policy decision on Wednesday. Markets widely expect the US central bank to keep its benchmark interest rate unchanged at 5.25% to 5.5%.
European stocks extended their losing streak for the third trading day. The STOXX Europe 600 Index fell 0.17% to close at 503.94 on Monday. Telecoms shares were among the worst performers, losing around 1.4%. However, auto stock bucked the overall trend, adding approximately 0.9% during the session.
The EURO STOXX 50 erased gains made in the prior session to close slightly lower at 4,982.76 points on Monday. Shares of Logitech fell sharply on Monday, after the company disclosed the departure of its CFO, Charles Boynton.
Germany’s DAX 40 slipped 0.02% to close at 17,932.68, while France’s CAC 40 lost 0.20% to settle at 8,148.14 on Monday.
What to watch: Investors await the release of economic reports on ZEW indicator of economic sentiment, labour costs and wage growth from the Eurozone today. The ZEW indicator of economic sentiment is expected to rose to 28 in March, from 25 in February.
Analysts expect hourly labour costs in the Eurozone to increase by 4.6% year-over-year in the fourth quarter, following a 5.3% rise in the third quarter, while wage growth is projected to surge by 4.6% year-over-year.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.20%, 0.63% and 0.99%, respectively.
US Senator Lindsey Graham met Ukraine’s President Volodymyr Zelenskyy to discuss the military aid package worth $60 billion. The news sent the RUB/USD slightly lower in forex trading this morning.
Canada’s industrial producer prices increased by 0.7% in February. The figure coming in higher than market expectations of a 0.1% rise exerted pressure on the CAD/USD forex pair.
Colombia’s trade deficit narrowed to $1.213 billion in January, from $1.834 billion in the year-ago month. However, the COP/USD pair fell slightly in forex trading this morning.
Brazil’s IBC-Br index of economic activity increased by 0.6% in January, easing from a 0.82% surge in the previous month, which exerted pressure on the BRL/USD forex pair.
US NAHB/Wells Fargo Housing Market Index surged to a reading of 51 in March, from 48 in February, which sent the Nasdaq 100 index higher by around 1% on Monday.
Germany’s ZEW economic sentiment index and ZEW current conditions index, Mexico’s GDP aggregate demand and consumer spending, Canada’s inflation rate, US building permits, housing starts, Redbook index, net long-term TIC flows, net purchases of US treasury bonds and notes, net treasury international capital flows and API crude oil stock change, China’s foreign direct investment, South Africa’s inflation expectations, Spain’s consumer confidence indicator, Central Bank of Brazil’s focus market readout, as well as Argentina’s balance of trade.
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