On April 22, a survey of economists indicated expectations that the Bank of England would likely keep interest rates unchanged next week and maintain this stance throughout the year. Economists largely continued the stable policy stance from last month but raised their inflation forecasts. Although financial markets had rapidly priced in a series of rate hikes last month due to concerns that a U.S.-Israel conflict with Iran could drive up energy costs and require a policy response, economists did not follow this view and stuck to their original outlook. The Monetary Policy Committee's statutory mandate is to keep inflation at 2%, but the survey showed that pre-war inflation was already well above this target, set to rise sharply in the coming months before declining early next year. Notably, Bank of England Governor Andrew Bailey stated earlier this month that investors should not take rate hikes for granted, a view already held by most forecasters. Current significantly tighter financial conditions appear to make them more inclined to accept Bailey's remarks.
Additionally, Kevin Warsh, nominated by former U.S. President Trump for Federal Reserve Chair, said during a Congressional hearing on Tuesday that the Fed needs to establish a new policy framework to address persistent inflation but did not provide details on the specific path. U.S. stocks turned lower during Warsh's remarks, after the Nasdaq hit a fresh intraday record high. At the Senate Banking Committee hearing, Warsh partly attributed the post-pandemic inflation surge to Fed policy missteps and emphasized that despite some moderation in inflation, high prices continue to put real pressure on American households. "Inflation has indeed eased, meaning prices are not rising as fast as a few years ago, but hardworking Americans still feel the pinch," Warsh said. "This means monetary policy needs institutional change and a new inflation framework." However, Warsh did not specify how this new framework would affect the rate path or specific policy tools.
Key data to watch today include the UK March CPI annual rate, UK March RPI annual rate, UK March unadjusted input PPI annual rate, and the Eurozone April preliminary consumer confidence index.
Dollar Index The dollar index edged higher yesterday with a slight daily gain, currently trading around 98.40. Besides short-covering and technical buying near the 98.00 level supporting the currency, better-than-expected U.S. retail sales data released during the session also provided some lift. Moreover, lingering uncertainties in the Middle East continued to underpin the index. Near-term resistance is seen around 99.00, with support near 98.00.
EUR/USD The euro declined slightly yesterday, trading around 1.1740 currently. Profit-taking and technical selling near the 1.1800 level weighed on the pair, while the dollar index's rebound—supported by short-covering and positive economic data—also pressured the euro lower. Additionally, weak economic data from the Eurozone during the session contributed to the downside. Resistance is near 1.1850 today, with support around 1.1650.
GBP/USD The British pound fell modestly yesterday, currently trading near 1.3500. Profit-taking exerted some downward pressure, while a stronger dollar—bolstered by Middle East uncertainties and solid U.S. economic data—also weighed on the currency. However, encouraging UK economic data released during the session limited deeper losses. Resistance is anticipated near 1.3600, with support around 1.3400.
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