Fundamental Comment

This Week: U.S., euro area inflation on the radar

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The most important events this week that could weigh on the movements of major currencies will be inflation reports from the U.S. and euro area, in addition to the important industrial production data from a number of major economies.

US Dollar

The U.S. dollar gained some ground last week amid some ease in concerns about a global trade war after U.S. President Trump exempted Canada and Mexico from the imposition of tariffs on imported steel and aluminum, and referred to the possibility of excluding other allies.

Some Republicans have mentioned that they would go for cancelling the tariffs, but that would need a two-third Congress majority to drop Trump’s signed proclamation.  

This week, the U.S. will release its CPI, PPI and retail sales data for the month of February, where the data likely to be carefully watched, as it may shape of the Fed’s upcoming monetary stance.

The consumer price index may have soared 0.3 percent in February and 2.1 percent from a year earlier, according to analysts’ forecasts.

Retail sales will probably show a 0.4 percent increase last month, following a 0.3 percent drop during the first month of 2018.

Euro

Last week, the euro came under pressure after the European Central Bank revised down its euro-area inflation projections for 2019 and warned of trade protectionism.

Still, the low inflation is a major concern to the ECB and may prompt the Governing Council to hold stimulus programs until its starts climbing to the central bank’s target.

The final consumer prices data due this week may show a downside revision to 1.2 percent rise in the year ended February from a preliminary reading of 1.3 percent soar.

Warnings from ECB President Mario Draghi along with the EU Commission threats of imposing tariffs on a number of U.S. products have negatively affected the euro.

Pound Sterling

The lack of economic data from the U.K. would leave the pound sterling subject to general movements in the market this week.

Commodities

Gold slumped last week, as the rebound of the dollar lowered the appeal of the precious metal as an alternative investment.

Gold has continued to face some downside pressure after hitting a top of $1340.49 an ounce on March 7.

Any attempts from the dollar to resume its rebound could trigger more selling in the yellow metal, yet it could rise slightly after finding support near $1316.  

Regarding oil, it reported its second straight weekly decline amid concerns from the rising U.S. crude output, as the latest data showed production has risen 23 percent since the middle of 2016 to 10.37 million barrels per day.

U.S. crude inventories may have surged by 0.58 million barrels in the week ended March 9, following a 2.4 million barrel increase a week earlier, the EI government report may show this week.

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