The German IFO business sentiment survey rose to fresh two-and-a-half-year highs, while the rate of inflation across the eurozone was revised slightly higher to 0.8 per cent y/y. The data support the argument that the ECB could leave its monetary policy unchanged at next week’s meeting, although even with an upward revision to inflation the data is still soft. Anything that might shed light on the outcome of the ECB meeting is likely to move markets as uncertainty remains high at this point. Economic data in the US has disappointed investors recently and traders are gearing up for testimony by FOMC’s Janet Yellen as well as revised GDP data.

Sterling

Sterling started to reclaim some of what was lost last week in terms of levels against the US dollar and euro. CBI distributive trades, a consumer demand survey, are expected to be released and show an improvement over last month’s release. Consumers have been driving growth in the UK and more evidence that this trend is continuing will likely be supportive of sterling.

US dollar

The flash PMI services survey fell to a four-month low of 52.7, while the jobs component dropped to an 11-month low. The employment data comes just in front of next week’s non-farm payrolls data. The US has seen a string of weaker than expected economic figures and markets are beginning to wonder if there is more to the data than an arctic blast. The revised GDP figure is expected to see a sharp downward revision, which will likely limit the dollar’s upside. The house price survey is expected to weaken slightly while confidence is seen slipping. The data are likely to continue reflecting the weaker growth trend, much to the dismay of investors, which will likely cap the dollar’s upside.

Euro

The vote of confidence was expected to go smoothly and it did, so that is at least one less thing to worry about as attention slowly swings towards the ECB meeting. ECB’s Mario Draghi said that the central bank will have ‘complete’ data to make a determination, while Visco talked about the possibility of negative deposit rates. The euro got a boost after the HICP figure and German IFO business sentiment figures supported the economic outlook. HICP was revised slightly higher to 0.8 per cent y/y, while the sentiment survey in Germany rose to fresh two-and-a-half-year highs.

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