USD

March’s US budget deficit hit a record monthly high of $660 billion, it was revealed yesterday. This is the third highest US monthly deficit on record. This followed the distribution of the Biden administration’s latest stimulus package.

The deficit for the first six months of the 2021 fiscal year has now jumped to a record $1.7 trillion compared to a year previous of $743 billion. US Treasury officials stated the pandemic did not have a big impact on the first six months of 2020. This is because increased outlay due to lockdown fueled unemployment and major aid spending didn’t start until May 2020.

USD still started the week optimistically due to the Federal Reserve’s supportive measure, the country’s improving vaccination drive and softer equity markets globally. Data for the day yesterday was sparse so the USD remained range bound throughout the day against EUR and GBP.

Key US data released today will show CPI month on month (m/m). This will again be used as a barometer for inflation and indicate whether interest rates will need to rise faster than the Fed has previously suggested.

We could see a reading well above the forecast due to the increased opening of the economy. So all eyes will be on this afternoon’s reading.

GBP

The pound held firm against the euro yesterday as there was little data to really move the market.

Sterling ended last week at around a six week low after losing over 2% vs the euro. Despite this, the UK economic fundamentals look relatively strong. The country’s retail and hospitality sectors opened further yesterday so this could be a temporary downturn for the pound. The two sectors make up a large part of the UK economy and covid cases are continuing to fall. They’re down 25% from last week with deaths down to just seven. 

Today the market is focused on this morning’s UK GDP m/m release. The data was just below forecast at 0.4%. Industrial Production m/m and Manufacturing m/m both beat forecasts of 1.1% and 1.3% consecutively with both being forecast for 0.5%. 

The strong data readings have seen the pound recover marginally against the euro in early trading. Attention will now switch to the German ZEW economic sentiment and euro ZEW later this morning.

Key announcements

10:00am – (EUR) – German ZEW Economic sentiment
10:00am – (EUR) – Euro ZEW economic sentiment-
01:30pm – (USD) – US CPI m/m
01:30pm – (USD) – US core CPI m/m