Last week the focus was on the vaccine news story with the EU summit and the ongoing US yield debate. German Chancellor Merkel stated that the country is now in a new pandemic while French President Macron advised new short-term restrictions. EU leaders, in theory, backed the potential to block vaccine exports and Commission President Von der Leyen stated that AstraZeneca must catch up on promised deliveries before exporting doses elsewhere. The EU health director stated that he was optimistic that the EU would hit a 70% vaccination target by late summer, but concerns continued, and the Euro retreated.

The Sterling was dented by the potential impact of vaccine disruption because of the ongoing tensions with the EU along with the risk of the move following the Suez Canal crisis. Softer inflation did little to help the currency. Inflation declined from 0.7% to 0.4% for February, well below expectations of 0.8% with core inflation rates at 0.9% from 1.4%. The lower-than-expected inflation rate will dampen any expectations of higher yields and curb currency support. However, the Bank of England Chief Economist Andy Haldane stated the UK economy could see a “rip-roaring” recovery even if consumers spend just a bit of the additional savings they accumulated during the COVID-19 crisis.

In the meantime, US Dollar sentiment was mixed following comments from central bankers. Dallas Federal Reserve Bank President Kaplan stated that his base case is that there will be a temporary surge in prices this year while inflation will settle down next year. He is on the hawkish end of the committee spectrum and expects the Federal Reserve to start increasing interest rates in 2022. Later in the week, Chicago Federal Reserve Bank President Evans stated that he suspected the Federal Reserve would not tighten until 2024. Federal Reserve Chair Powell reiterated that monetary policy would remain highly accommodative and reiterated that the central bank is strongly committed to inflation that averages 2% over time.

Looking to the week ahead, it will be a short week for the UK and Eurozone due to the Good Friday and Easter Monday holidays. As we have seen in recent weeks, news regarding vaccines and the subsequent rollout as well as the ongoing yield story will drive markets. Data of particular attention will be the all-important jobs data from the US with the all-important labour data due out on Friday. With the ongoing yield story, the labour data will be closely watched to highlight the speed of recovery in the US, which in turn will filter through to monetary policy down the road.

Monday

  • UK Mortgage Approvals
  • UK Net Lending to Individuals
  • FOMC Waller Speaks

With the ongoing schemes to help keep the UK housing market moving the market will be keen to see if the momentum continues in the form of mortgage approvals and net lending. In recent days, the market is taking more notice of FOMC members when they speak as they try to decipher monetary policy. Federal Reserve Governor Christopher Waller is due to participate in a virtual panel discussion about Federal Reserve independence.

Tuesday

  • US Consumer Confidence

It is a slightly quieter day today with only US consumer confidence. The recent change in the administration, the ongoing rollout of the vaccine and relief package should all help boost confidence levels.

Wednesday

  • UK GDP
  • EZ Inflation
  • US ADP Employment

The second reading of UK GDP is due for release and not expected to deviate from the projected 1% growth. Any movement on either side could result in Sterling volatility. The consumer price index from the Eurozone is expected to show inflation creeping higher to 1.3%. in the meantime, the ADP employment report from the US will provide the market with some early insight into imports and closely watched labour data on Friday.  

Thursday

  • German Retail Sales
  • EZ PMI Manufacturing
  • US ISM Manufacturing
  • US Jobless Claims

Markets could see an additional bout of volatility today ahead of the extended weekend for Easter. In terms of data, economic activity from the Eurozone and US will be monitored in the form of manufacturing data whilst German retail sales adds another layer. Ahead of the US labour data on Friday, the market will continue to focus on the weekly jobless claims.

Friday

  • US labour data

US labour will be closely monitored this month as recovery in the US continues to pick up momentum. Sliding unemployment and job creation will be a by-product and may have a wider impact on inflation moving forward and subsequently the ongoing yield story which is tied to interest policy. As a result, the market will be keeping a close eye on the US labour data which is expected to show unemployment sliding from 6.2% to 6.0% and job creation growth substantially. The data could result in larger than expected moves as there will be thinner markets due to the Easter weekend.

 

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