Pound dips mildly after disappoint inflation data but loss is limited. In particular, headline CPI slowed to 2.7% yoy in February, down from 3.0% yoy and missed expectation of 2.8% yoy. The reading doesn’t give any added pressure for BoE to rate interest rate in May. Nonetheless, CPI stays above the mid-point of 2-3% target range. BoE board members should still view the Brexit transition deal as a relief to businesses. And investments could come back with, at least, part of the uncertainties cleared. Know hawks like Michael Saunders and Ian McCafferty could still start pushing for rate hike during this week’s meeting. Hence, there is no sustainable selloff in the pound, just mild retreat.
Here is the list of inflation data:
- CPI Feb: 0.4% mom vs exp 0.5% mom vs prior -0.5% mom
- CPI Feb: 2.7% yoy vs exp 2.8% yoy vsprior 3.0% yoy
- CPI Core Feb: 2.4% yoy vs exp 2.5% yoy vs prior 2.7% yoy
- RPI Feb: 0.8% mom vs exp 0.8% mom vs prior -0.8% mom
- PPI Input Feb: -1.1% mom vs exp -0.9% vs prior 0.7% mom
- PPI Input Feb: 3.4% yoy vs exp 3.8% yoy vs prior 4.7% yoy
- PPI Output Feb: 0.0% mom vs exp 0.1% mom vs prior 0.1% mom
- PPI Output Feb: 2.6% yoy vs exp 2.7% yoy vs prior 2.8% yoy
- PPI Output Core Feb: 0.2% mom vs exp 0.2% mom vs prior 0.3% mom
- PPI Output Core Feb: 2.4% vs exp 2.4% yoy vs prior 2.2% yoy
GBP/USD is staying comfortably above 55H EMA despite the post CPI dip. Recent rise is still on course through 1.4087 to 1.4144 resistance.
Euro dips as German ZEW indicates “Economic Outlook Worsens Considerably”
Euro dips after much weaker than expected sentiment data. German ZEW economic sentiment dropped to 5.1 in March, down from 17.8, below expectation of 13.0. Current situation gauge dropped to 90.7, down from 92.3, above expectation of 90.0. Eurozone ZEW economic sentiment also dropped sharply to 13.4, down from 29.3, missed expectation of 28.1.
ZEW titled the release as “Economic Outlook Worsens Considerably” which is an indication of how bad things turned. ZEW President Professor Achim Wambach noted that “concerns over a US-led global trade conflict have made the experts more cautious in their prognoses. The strong euro is also hampering the economic outlook for Germany, a nation reliant on exports.” But he added that “combined with the experts’ continued positive assessment of the current situation, however, the outlook is still largely positive.”
While EUR/USD drops notable after the release, there is no change in it’s mildly bullish outlook. That is, price actions from 1.2445 are viewed as a corrective pattern. It should have completed with three waves down to 1.2257 already. Or in a worse scenario, it’s extending as a five wave triangle pattern. In either case, further rise is expected soon through 1.2445 to real key resistance at 1.2555.