Talking Points
-
Euro: Cyprus to Sell EUR 400M of Gold Reserves, Germany Opposes More Aid
-
British Pound: U.K. Inflation to Grow 2.8%, BoE Minutes in Focus
-
U.S. Dollar: Empire Manufacturing Misses Forecast, TIC Flows, NAHB on Tap
Euro: Cyprus to Sell EUR 400M of Gold Reserves, Germany Opposes More Aid
The Euro is struggling to hold its ground on Monday as Cyprus looks to sell EUR 400M of its ‘excess’ gold reserves to draw up the EUR 7.0B contribution needed to obtain the EUR 10.0B bailout, and the single currency may fail to maintain the narrow range carried over from the previous week as European policy makers maintain a reactionary approach in address the risks sounding the monetary union.
Despite the ongoing turmoil in Cyprus, the German Finance Ministry said ‘there is no additional financial requirement’ for the periphery country, and made an attempt to talk down the threat of a euro-area exit as the governments operating under the single currency struggle to meet on common ground. Although the euro-area is expected to return to growth later this year, the governments operating under the single currency may seek further external support over the coming months as they struggle to get their house in order.
As European finance ministers and central bank governors prepare for the G20 meeting on April 18-19, the group may come under increased pressure to take a more aggressive approach in addressing the risks surrounding the region, and we may see a growing number of European Central Bank officials show a greater willingness to ease monetary policy further as the economic downturn threatens price stability.
As the EURUSD struggle to put in a close above the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, the pair appears to be carving a lower top ahead of the next ECB interest rate decision on May 2, and the euro-dollar may continue to give back the rebound from back in November (1.2659) as the fundamental outlook for Europe turns increasingly bleak.
British Pound: U.K. Inflation to Grow 2.8%, BoE Minutes in Focus
The British Pound continued to consolidate, with the GBPUSD tagging a low of 1.5302, but we may see the sterling build a short-term base above the 50.0% Fib from the 2009 low to high (1.5260) as market participants scale back bets for more quantitative easing.
As the economic docket is expected to show the headline reading for U.K. inflation advancing another 2.8% in March, sticky price growth should prop up the Pound over the next 24-hours of trading, and the GBPUSD may track higher ahead of the Bank of England Minutes due out on April 17 as the policy statement is likely to show another 6-3 split with the Monetary Policy Committee.