The Federal Reserve will begin its two-day monetary policy meeting later today. Whilst policy is expected to remain unchanged, the markets will be looking out for comments from Federal Reserve Chair, Jerome Powell. The meeting will conclude with a press conference tomorrow.
The pound has managed to hold on to gains made against the euro yesterday and is trading around the same levels against the dollar. Data which measures the health of the UK retail sector will be released this morning, expected to show an improvement due to the reopening of non-essential shops.
Disappointing business climate figures for Germany put pressure on the euro yesterday. The data revealed that companies are not very optimistic about the next six months, possibly due to the third wave of infections in Europe.
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GBP: UK retail data due this morning
The pound is trading around the same levels against the euro and the dollar this morning. Sterling recovered some lost ground yesterday against both the dollar and the euro but is still lower than it was this time last week against the euro.
This morning, CBI Distributive Trades data will be released for the UK, which measures the health of the retail sector. The last reading in March came in below expectations at -45, but there is expected to be a substantial lift in April due to the easing of restrictions and the opening of non-essential shops.
Hopes are building that the UK will experience a sharp economic recovery this year. Several banks and financial institutions have revised their growth forecasts to predict a swifter recovery due to the easing of restrictions.
EUR: Disappointing business climate data for Germany
The euro was slightly weaker against the dollar yesterday, partly due to disappointing economic data from Europe.
German IFO data, which measures entrepreneurs’ sentiment about the current business situation, missed expectations. The figure rose to 96.8 in April, little-changed from the previous month’s 96.6 and below market expectations of 97.8. However, this was the highest reading since June 2019.
The data shows that the third wave of infections in Europe is hampering business optimism for the next 6 months.
USD: Fed meeting to begin today
The dollar has edged slightly higher this morning against a basket of currencies but remained near multi-week lows ahead of the Federal Reserve’s two-day monetary policy meeting.
No changes to policy are expected at the meeting, but the markets will be looking out for comments from Federal Reserve Chair Jerome Powell. He is likely to face questions about whether the improving US economy means that monetary policy can be withdrawn.
The meeting will conclude in a press conference tomorrow evening.