EUR/USD
Euro-area inflation slowed in March by more than economists forecast to the lowest level in over four years, keeping pressure on the European Central Bank to take action to foster the currency bloc’s recovery. The inflation rate has been below 1 percent for six months, while the ECB seeks to keep it at just under 2 percent. Today’s result is half of the ECB’s forecast for 2014 and well below the central bank’s medium-term objective, Consumer prices grew 0.5 percent in the year, after a 0.7 percent gain in February, the European Union’s statistics office in Luxembourg said today. That missed the 0.6 percent median forecast in a Bloomberg News survey of 41 economists. The inflation rate has been below 1 percent for six months, euro was little changed.
GBP/USD
The pound advanced for a fourth quarter versus the dollar, the longest winning streak in more than six years, before reports this week that analysts forecast will add to evidence the recovery is strengthening. Gilts slid as data showed house prices in England and Wales rose in March for a 14th month even as a separate gauge revealed U.K. mortgage approvals fell to a four-month low in February. Further gains in sterling may be limited as the pound dropped against most of its 16 major peers this month. The pound rose 0.3 percent against the dollar to $1.6680 at 4:25 p.m. London time, gaining 0.7 percent since the end of last year. The fourth quarterly advance is the longest since the period ended September 2007.
USD/JPY
Japan’s economy will probably withstand a sales tax increase that takes effect today as Prime Minister Shinzo Abe prepares economic stimulus measures and companies raise wages, the country’s new bank lobby chief said. The 3 percentage-point tax increase to 8 percent may trigger Japan’s deepest one-quarter economic contraction since the March 2011 earthquake, The government plans to front-load budget spending to help weather the blow from the higher levy, and the Bank of Japan has signaled that it’s ready to boost easing if needed. Gross domestic product will shrink 3.5 percent in the three months ending June, ending a projected six straight quarters of growth. The government approved a 5.5 trillion yen ($53 billion) extra budget in December to offset the impact of the higher sales tax.
USD/CAD
A weakening Canadian dollar is positive for most of the country’s companies, boosting profits earned in U.S. dollars relative to costs incurred in the local currency, Moody’s Investors Service said in a report. Canadian National Railway (CNR) Co. and Canadian Pacific Railway Ltd. will also benefit from a weaker loonie because both have profitable U.S. subsidiaries, the report said. Performance at some other transportation companies, such as Air Canada, will be damped because their revenues are denominated in Canadian dollars while they buy fuel in the U.S. currency.
