The Fed remains dovish as commodity prices rebound…
Over the last week, the Federal Reserve sparked US dollar weakness as they left interest rates on hold. The forecast outlined by the Fed at the beginning of the year was for four gradual rate rises over the course of the year, but now markets are anticipating just one further hike, if any at all during 2016. This is owing to the uncertainty in global markets as well as flat lining inflation and global growth concerns.
Despite this, commodity prices have rebounded slightly. This has helped stock markets recover from their slump earlier in the year and triggered a strong rally in risk assets. Markets will be keenly watching this week’s data from the US for further direction as we move into the Easter weekend. Core Durable Goods and unemployment claims are released on Thursday.
While the Federal Reserve have chosen to remain dovish on forthcoming monetary policy, the European Central Bank have expanded their quantitative easing programme and cut deposit rates. The outlook for growth and inflation in the EU has continued to slow further, but this has helped reverse the negative sentiment; with the Central Bank standing firm in its efforts to boost inflation.
…and Sterling rallies against the dollar
Sterling has rallied almost 4 cents against the US dollar on the back of dovish comments made by the Fed last week on monetary policy as well as a watchful evaluation of global growth conditions.
As monetary policy gets slightly less divergent, fears regarding a Brexit scenario and a soft inflation outlook has capped any further gains for the pound. The CBI Industrial Trends Orders print is the only set of data out on the economic calendar to provide further direction.