Will dip in inflation impact BoE’s rate decision?

• UK inflation forecast to dip
• German economic sentiment to tumble?
• RBA minutes in focus

UK inflation poised to fall below 3%

All eyes are likely to be on the UK this morning as it publishes its latest consumer price index.

Economists expect the CPI figures will reveal that the UK’s inflation rate slid to 2.8% in February, falling below 3% for the first time since August last year.

Any moderation in inflation may prompt an uptick in the Pound on hopes that subdued price pressure on households may translate into increased consumer spending in coming months.

On the other hand the dip in inflation gives the Bank of England (BoE) a little more room to breathe, possibly alleviating the pressure to accelerate its monetary tightening this year.

The BoE is due to hold its March rate decision this week, with the dip in inflation possibly having a considerable impact on the bank’s policy outlook.

Fall in German economic sentiment may hamper EUR

Germany will publish its latest economic sentiment index later this morning, with a potential sharp drop in sentiment unlikely to be welcomed by EUR investors.

Analysts suggest that the index will have witnessed a considerable drop from 17.8 to a seven-month low of 13.1 in March, indicating that economists have become significantly less optimistic in their outlook this month.

The index for the wider Eurozone is likely to be equally gloomy as it is forecast to fall to its lowest levels since October.

Observers are likely to draw a line between the downturn in sentiment and the apparent moderation of growth in the Eurozone as economists suggest that its recent run of growth may be coming to an end.

Further slide in dairy prices may rattle NZD

The New Zealand dollar may find itself sliding later today on suggestions that dairy prices are poised to slide again at the latest global dairy auction.

Analysts forecast prices are once again on track to slide today, after falling 0.5% and 0.6% in the previous two auctions.

With dairy products accounting for over 20% of the total value of New Zealand exports each year, any slide in prices would have a considerable impact on the country’s GDP.

Upcoming Data

Tuesday, 20 March, 2018

09:30                     GBP Consumer Price Index  
10:00                     EUR German Economic Sentiment Index
15:00                     NZD Global Dairy Auction