Investors await US data following overnight fall in Asian markets

Tom Tong15/Apr/2011Currency Updates

GBP

Sterling has yet to recover its momentum following this week’s surprise drop in inflation, edging lower in overnight trade, down down 0.1% against the US dollar as the greenback capitalized on risk aversion after Chinese GDP figures pushed stocks lower across Asian markets.

There are no significant UK data releases today.

EUR

Eurozone Consumer Price Index figures amount to the only bit of significant European economic data today, with expectations calling for the reading to match estimates of an inflation rate at 2.6% in March. Barring a significant revision to the upside, the outcome is unlikely to yield a significant reaction considering its limited implications for the ECB rate hike outlook. The estimate for March came out just before an increase in borrowing costs, the implications of faster price growth over that period have already been validated and priced into the euro exchange rate.

In further news, Moody’s cut Ireland’s debt to just above ‘junk’ – Baa3, leaving the outlook negative, citing a lack of financial strength and a poor economic growth outlook.

USD

Today the market will look to US Consumer Price Index figures due in the second half of the session, Importantly, the core CPI gauge is expected to yield a far more modest increase. With that in mind, the implications for the uptick in the headline figure for Federal Reserve tightening expectations is likely limited considering a number of voting FOMC members have already dismissed energy-driven spikes in price growth as a reason to unwind stimulus, hinting that any move higher in the US dollar will need to come from risk aversion and not yields for the time being.

Separately, US Industrial Production is expected to accelerate, with output adding 0.5% to yield the strongest performance in three months. Finally, the University of Michigan Consumer Confidence gauge is tipped to show sentiment rebounding in April after hitting a 16-month low in March. For their part, the markets appear unsure of how to feel about the data set just yet, with stock index futures tracking the S&P 500 equity benchmark flat and hinting at indecisive risk appetite trends heading into the weekend.

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Written by Tom Tong

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