On March 17, the UK's Office for National Statistics announced that non-alcoholic beer has been added to the basket of goods used to measure inflation, reflecting shoppers' increasing focus on healthier lifestyles, while various wine categories have been consolidated into one. The agency also noted it will begin tracking hummus prices to improve the representation of vegetables in current statistics. Although UK inflation fell to 3.0% in January, hitting a near one-year low, concerns about a resurgence in inflation have emerged due to soaring energy prices caused by Middle East conflicts. The adjustment to the inflation basket comes at this sensitive time and will provide a more accurate benchmark for measuring changes in the cost of living. According to recent estimates from ING and RSM UK, if recent increases in oil and gas prices persist, UK inflation could rise to more than double the Bank of England's 2% target. ING economist James Smith suggested that if oil prices remain elevated in the second quarter, inflation could reach 4.7% by September. RSM UK economist Tom Pugh estimated that inflation would likely range between 4.5% and 5%.
Separately, data released by the Federal Reserve on Monday showed that US industrial production increased by 0.2% month-on-month in February, slightly above market expectations of 0.1%. The January figure was revised to a 0.7% gain, while December's reading remained at 0.3%. Year-on-year, industrial production rose by 1.4% in February. The capacity utilization rate held steady at 76.3% in February, unchanged from January and above the market forecast of 76.2%. This level matches that of February 2025, indicating stable industrial capacity utilization. By sector, manufacturing output increased by 0.2% month-on-month, meeting expectations. Automobile and parts production surged by 1.7%, serving as the primary driver of growth in manufacturing. Durable goods manufacturing rose by 0.1%, while non-durable goods increased by 0.2%. Mining output grew strongly by 0.8%, whereas utilities output declined by 0.6%.
Key data to watch today include the Eurozone ZEW Economic Sentiment Index for March, Germany’s ZEW Economic Sentiment Index for March, and the US Pending Home Sales Index month-on-month for February. Additionally, the Reserve Bank of Australia’s interest rate decision at midday warrants close attention.
Dollar Index The dollar index moved lower in a fluctuating session yesterday, falling below the 100.00 mark, with the current exchange rate hovering around 99.90. Besides profit-taking exerting downward pressure, a retreat in crude oil prices alleviated inflation concerns and tempered expectations of a hawkish Federal Reserve, contributing to the index’s decline. Economic data released during the session were mixed and had limited impact on the market. Today, focus will be on resistance near 100.50, with support around 99.50.
EUR/USD The euro advanced in volatile trading yesterday, reclaiming the 1.1500 level, with the current exchange rate near 1.1490. Along with short-covering providing some support, the dollar index weakened due to profit-taking and reduced expectations of Fed hawkishness, further aiding the euro’s rebound. Additionally, expectations of interest rate hikes by the European Central Bank also lent support. Resistance near 1.1600 will be monitored today, with support around 1.1400.
GBP/USD The British pound climbed in a choppy session yesterday, regaining the 1.3300 level, with the current exchange rate around 1.3310. Besides short-covering offering some lift, the dollar index’s drop below 100.00—driven by profit-taking and diminished Fed hawkish expectations—also supported the pound’s rise. Moreover, expectations that the Bank of England will maintain its current policy stance this month provided additional backing. Resistance near 1.3400 will be watched today, with support around 1.3200.
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