Talking Points
Euro: Spain Calls for More ECB Action to Repair Transmission Mechanism
British Pound: U.K. Business Outputs Top Forecast, Eyes 38.2% Fib
U.S. Dollar: Wholesale Sales, Inventories on Tap
Euro: Spain Calls for More ECB Action to Repair Transmission Mechanism
The Euro pared the overnight advance to 1.3067 as Spanish Prime Minister Mariano Rajoy said the EU should consider revamping the European Central Bank’s (ECB) mandate, while Economy Minister Luis de Guindos argued that the Governing Council should introduce measures to address ‘fragmentation of the capital markets’ as the euro-area remains mired in recession.
Moreover, Mr. Guindos said the ECB should take further steps in repairing the transmission of monetary policy amid the ongoing turmoil in the periphery countries, while U.S. Treasury Secretary Jacob Lew encouraged the region to adopt policies that foster consumer demand as the outlook for growth and inflation remains weak.
As the governments operating under the single currency struggle to get their house in order, the ECB may persistently show a greater willingness to push the benchmark interest rate to a fresh record-low, and the Governing Council may carry out its easing cycle throughout 2013 as the prolonged recession continues to threaten price stability.
Nevertheless, the EURUSD may continue to work its way back towards the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as it breaks out of the downward trending channel dating back to February, but the euro-dollar may continue to give back the rebound from back in November (1.2659) as the governments operating under the single currency look for more time in getting their house in order.
British Pound: U.K. Business Outputs Top Forecast, Eyes 38.2% Fib
The British Pound pared the decline from the previous day and advanced to a high of 1.5324 as the fundamental developments coming out of the U.K. encouraged an improved outlook for growth. Indeed, U.K. manufacturing increased 1.0% in February versus forecasts for 0.4% print, while industrial outputs climbed 0.8% after contracting a revised 1.9% during the prior month.
As the Bank of England (BoE) sees a slow but sustainable recovery in the U.K. the Monetary Policy Committee is likely to endorse a neutral policy stance over the remainder of the year, and we may see a growing number of central bank officials start to adopt a hawkish tone as inflation is expected to hold above the 2% target throughout the policy horizon.
As the GBPUSD continues to hold above the 50.0% Fib from the 2009 low to high around 1.5260, the pair looks poised to work its way back towards the 38.2% retracement (1.5680), and may stay afloat going into the BoE Minutes due out on April 17 as we anticipate another 6-3 split within the MPC.
U.S. Dollar: Wholesale Sales, Inventories on Tap
The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) is struggling to hold its ground on Tuesday, with the gauge slipping to a low of 10,480, but we may see the greenback regain its footing later today as the economic docket is expected to instill an improved outlook for the world’s largest economy.
Indeed, wholesale sales are projected to increase 1.3% in February, while wholesale inventories are expected to expand another 0.5% during the same period amid the resilience in private sector consumption. In turn, we may see a growing number of Fed policy makers strike a more neutral to hawkish tone for monetary policy, and the central bank appears to be slowly moving away from its easing cycle as the outlook for growth and inflation picks up.
FX Upcoming
Currency
GMT
EDT
Release
Expected
Prior
USD
13:30
9:30
Fed’s Jeffrey Lacker Speaks on World Economy
USD
13:30
9:30
IMF Releases World Economic Outlook
GBP
14:00
10:00
NIESR Gross Domestic Product Estimate (MAR)
-0.1%
USD
14:00
10:00
Wholesale Inventories (FEB)
0.5%
1.2%
USD
14:00
10:00
Wholesale Sales (MoM) (FEB)
1.5%
-0.8%
EUR
14:15
10:15
EU’s Van Rompuy Meets Slovenian Prime Minister
EUR
16:00
12:00
ECB’s Jorg Asmussen Speaks on Euro Economy
USD
17:00
13:00
Fed’s Dennis Lockhart Speaks on Financial Stability
NZD
22:45
18:45
Card Spending – Retail (MoM) (MAR)
0.3%
0.8%
NZD
22:45
18:45
Card Spending (MoM) (MAR)
0.8%
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong
To be added to David’s e-mail distribution list, send an e-mail with subject line “Distribution List” to dsong@dailyfx.com.
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Source: Daily fx