Goldman Says Commodities to Benefit as Central Banks Cut Rates

Economic

Commodity

Summary:

Commodities will advance this year as central banks in the US and Europe move to reduce interest rates, helping to support industrial and consumer demand. But the analyst said it is too early to call a decisive end to these respective bear markets.

Commodities will advance this year as central banks in the US and Europe move to reduce interest rates, helping to support industrial and consumer demand, according to Goldman Sachs Group Inc.

Raw materials may return 15% over 2024 as borrowing costs come down, manufacturing recovers, and geopolitical risks persist, analysts including Samantha Dart and Daan Struyven said in a March 24 note. Copper, aluminum, gold and oil products may climb, according to the bank, which also stressed the need for investors to be selective as gains wouldn’t be universal.

Commodities have made a modest advance in the first quarter, with crude strengthening, gold hitting a record, and copper topping $9,000 a ton. Policymakers at both the US Federal Reserve and European Central Bank have signaled their intention to reduce borrowing costs this year as inflation ebbs. In addition, China has flagged further support for its recovery.

“We find that US rate cuts in non-recessionary environments lead to higher commodity prices, with the biggest boost to metals (copper and gold in particular), followed by crude oil,” the analysts said. “Importantly, the positive impact on prices tends to increase with time, as the growth impulse from looser financial conditions filters through.”

Goldman’s cautiously bullish outlook echoes comments from other market watchers. Commodities are entering a fresh cyclical upswing aided by tighter supplies and an upturn in the global economy, Macquarie Group Ltd. said earlier this month. Jeff Currie, formerly the head of commodities research at Goldman and now at Carlyle Group LP, has also forecast gains as the Fed cuts rates. Elsewhere, JPMorgan Chase & Co. highlighted gold’s upside potential.

Among Goldman’s year-end forecasts, copper was seen at $10,000 a ton, aluminum at $2,600 a ton, and gold at $2,300 an ounce, which would be a nominal record. The base metals were last at $8,884 a ton and $2,306 a ton on the London Metal Exchange, while bullion was close to $2,167 an ounce.

“In the midterm, we continue to hold a constructive view on gold underpinned by eventual Fed easing, which should crucially reactivate the largely dormant ETF buying,” the analysts said, referring to exchange-traded fund flows.

In contrast — and highlighting its call for a selective approach — the bank remained bearish on the outlook for battery metals such as nickel, cobalt and lithium carbonate. “We believe it is too early to call a decisive end to these respective bear markets,” the analysts said.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Kevin Du

Economic

As the Philippines works to ramp up mining to meet global demand for metals crucial to the green energy transition, environmental groups are demanding strict limits to protect nature and Indigenous lands.

The Philippines has the world's fourth-largest copper reserves, fifth-biggest nickel deposits and is also rich in cobalt - all of which have important uses in clean energy technologies, from lithium-ion batteries for electric vehicles (EVs) to solar panels.

Mineral requirements for renewable energy technologies must be quadrupled by 2040 to reach the goals of the Paris Agreement, and the World Bank estimates a 500% increase in the demand for transition minerals.

That is encouraging mineral-rich countries like the Philippines, where mining is relatively undeveloped and only accounts for 1% of gross domestic product (GDP), to boost their production of so-called critical minerals.

But with nearly two-thirds of the Philippines' mineral reserves lying on Indigenous lands, environmental and rights campaigners are demanding new legislation to limit mining activity to the minimum needed for the green energy switch.

"Mining is a necessary evil in our civilisation and daily life. But we believe in mining anchored on just minerals transition, or mining what is absolutely necessary and sourcing them responsibly," said Maya Quirino, advocacy coordinator at the Legal Rights and Natural Resources Centre (LRC), a local nonprofit that works for Indigenous and environmental rights.

"For example, gold is not essential to the energy transition," she told Context.

Quirino's organisation is leading calls for a new mining law that would only permit the "indispensable extraction" of critical minerals. It also seeks to prohibit destructive open-pit mining, or mining in sensitive ecosytems, and hike taxes on the companies to give great benefits to local communities.

A draft bill filed by lawmakers and supported by the LRC in 2021 is still pending in Congress, but its backers are working to gain more support this year from legislators.

Just Transition?

Globally, the area covered by mines has doubled over the past three years, driven by demand for critical minerals, according to a 2023 study by LRC.

In the Philippines, the group says, that has exacerbated mining's negative impacts on people and the environment - whether by depleting water supplies or forcing Indigenous peoples to move elsewhere.

Mining projects in the Southeast Asian country have often prompted protests by Indigenous people and disputes over their land rights, and the impact of mines on the environment, including water supplies.

Recent examples include the Tampakan and Didipio gold and copper mines in South Cotabato and Nueva Vizcaya provinces, where local communities have protested over pollution and water shortages they blame on the mines.

"Since 2017, we could no longer farm on my father's land because it dried up. Many farmlands here no longer function due to irrigation issues," said Myrna Duyan, a member of the Tuwali indigenous group who lives near the Australian-owned open-pit Didipio mine.

Duyan said some Indigenous people had been displaced by the mining, while others said it had split the community between those opposed to the mine and those who saw it as a welcome economic boost.

Despite the perceived economic benefits, "most of the taxes from mining goes to the national government and not to the local communities", said Quirino, whose group says the royalties paid by mining companies should be hiked.

Under current laws, miners pay 4% in excise tax to the state and 1% in royalties to Indigenous communities.

While Philippine President Ferdinand Marcos Jr. has vowed to overhaul the industry's tax regime, the proposed minerals management bill is not among his priority measures and he has not commented publicly on campaigners' wider demands.

The bill, which seeks to raise the current excise tax and royalties to 10% each, also seeks heavier fines on individuals and corporations for human rights and environmental harms.

"If we don't have a framework anticipating the huge demand for minerals, we will only open the country to mining that only promises money but without a nuanced approach to our resources," said Quirino.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Thomas

Stocks

In the past two weeks, China, and Hong Kong benchmark stock indices (CSI 300, Hang Seng Index, Hang Seng TECH Index & Hang Seng China Enterprises Index) have traded sideways after recording gains of between +16% to +24% from their respective early February lows to recent mid-March highs.

These recent bouts of positive performances have propelled China and Hong Kong to be the top-performing major stock markets in February and are supported by the absence of a strong US dollar environment that reduces the risk of capital outflows as China remains mired in a deflationary risk spiral as well as ongoing high tech trade war with the US since 2018.

Hence, the recent rallies and outperformance of the key China and Hong Kong benchmark stock indices have been indirectly supported by a stable Chinese yuan where the CNH (offshore yuan) has traded in a tight range of 0.7% against the US dollar between 5 February to 12 March.

SNB surprised rate cut may trigger a currency war

Last Thursday, 21 March, the Swiss National Bank (SNB) engineered a surprise on market participants by enacting a rate cut of 25 basis points (bps) to 1.5% on its key policy rate, its first cut in nine years, and ahead of the US Federal Reserve, Bank of England (BoE), and European Central Bank (ECB).

One of the push factors for enacting an earlier rate cut by SNB other than a clear deceleration in inflationary trend (annualized core inflation rate has remained below 2% since May 2023) is the persistent strength of the franc that could erode the competitiveness of Swiss goods and services which in turn put a dent on economic growth in Switzerland.

The EUR/CHF cross pair has accelerated its decline in the past three years where it tumbled by -17% to print a close of 0.9270 on 5 January 2024, a fresh all-time low on a closing level basis since the surprise EUR/CHF unpeg on 15 January 2015 (intraday low of 0.8600 with a daily close of 0.9753).

The CHF tumbled after the surprise SNB’s decision; it fell by -1% against the EUR to its weakest level since July 2023. Also, it dropped -1.2% against the US dollar to hit a fresh four-month low.

Interestingly, the offshore yuan (CNH) tumbled by -0.8% against the US dollar to print a two-month low last Friday, 22 March after the China central bank, PBoC set a weaker-than-expected daily fixing on the onshore yuan (CNY).

This latest set of FX policy moves by PBoC is likely to have signaled a willingness to sacrifice some form of capital outflows over maintaining exports’ competitiveness to drive economic growth, and to fill the gap in the absence of robust domestic demand.

If the US dollar continues to strengthen due to the Fed’s less dovish stance (in no hurry to cut rates), it may lead to a bout of engineered currency devaluations among major exporters such as South Korea and Singapore which is likely to put pressure on PBoC to weaken the CNH further to make up for a further potential loss of trade competitiveness.

Overall, a persistent US dollar strength trend may trigger “beggar-thy-neighbour” currency war-liked monetary policies among exporters.

A weaker CNH does not bode well for risk assets

Fig 1: CNH/USD direct correlation with CSI 300, HSCEI & HSI as of 25 Mar 2024 (Source: TradingView, click to enlarge chart)

In the past two years, periods of significant weakness in the CNH (offshore yuan) against the US dollar have triggered a negative feedback loop back into the China and Hong Kong stock markets but to a lesser extent in emerging stock markets excluding China (see Fig 1).

Therefore, the recent softness seen in the CNH may trigger another round of potential multi-week bearish movements in the CSI 300, Hang Seng China Enterprises Index, and Hang Seng Index.

Bearish momentum has resurfaced in the Hang Seng Index

Fig 2: Hong Kong 33 Index major trend as of 25 Mar 2024 (Source: TradingView, click to enlarge chart)

Fig 3: Hong Kong 33 Index short-term trend as of 25 Mar 2024 (Source: TradingView, click to enlarge chart)

The price actions of the Hong Kong 33 Index (a proxy on the Hang Seng Index futures) have staged a bearish breakdown below its former ascending channel support in place since the 22 January 2024 low and its 20-day moving average on last Friday, 22 March.

In addition, the daily RSI momentum has also broken below its key parallel ascending support and just breached below the 50 level which indicates a potential revival of medium-term bearish momentum.

In the lens of technical analysis, this latest set of bearish elements suggests the recent rally of +16% from the 22 January 2024 low of 14,777 has taken the form of a “bearish flag” configuration, aka countertrend rebound motion within its major and long-term secular bearish trend phases (see Fig 2).

Last Friday’s bearish breakdown seen in the “bearish flag” and its daily RSI suggested a likelihood that the bearish impulsive down move sequence has resumed.

If the 16,960 key short-term pivotal resistance is not surpassed to the upside, the Index may see a further potential decline to expose the next intermediate supports at 16,135 (also the 50-day moving average), and 15,730 (see Fig 3).

However, a clearance above 16,960 negates the bearish tone to see a retest on the 17,230 minor swing high area of 13 March 2024, and above it sees the medium-term pivotal resistance coming in at 17,570/600.

Source: MarketPluse

Risk Warnings and Disclaimers

Add to Favorites

Ukadike Micheal

Economic

Forex

Australia's government intends to endorse a minimum wage increase in alignment with inflation this year, aiming to alleviate the financial burden faced by low-income families amidst the persisting challenges of meeting living expenses. The proposed raise, albeit smaller due to a decline in inflation rates, seeks to prevent a regression in the real wages of low-paid workers, maintaining a stance upheld by the government over the past two years.

Treasurer Jim Chalmers emphasized the necessity of lifting the minimum wage to ensure the economic security of individuals at the lower end of the income spectrum, acknowledging the disproportionate impact of rising living costs on this demographic. The government's commitment reflects a broader strategy to mitigate financial strain and foster economic resilience among vulnerable segments of the population.

Last July, the Fair Work Commission responded to surging living costs by implementing a substantial 5.75% increase in the minimum wage, a move initially feared to exacerbate inflationary pressures. However, subsequent observations revealed no alarming signs of a detrimental wage-price spiral, as inflation rates tapered off to a two-year low of 3.4% from a previous peak of 8.4%.

The Reserve Bank of Australia anticipates a further decline in inflation, projecting a reduction to 3.3% by June 2024. This outlook underscores a cautiously optimistic trajectory, signaling a potential easing of inflationary pressures in the near term.

In addition to endorsing a minimum wage hike, the Labor government has pledged to introduce additional measures aimed at easing the burden of living expenses in the upcoming budget. Among these initiatives, tax cuts for all taxpayers slated for implementation in July represent a concerted effort to stimulate economic activity and enhance household financial well-being.

From a technical perspective, the government's decision to support a minimum wage increase aligned with inflation reflects a delicate balance between addressing socio-economic disparities and safeguarding macroeconomic stability. While the proposed raise aims to bolster the purchasing power of low-income earners, its moderation in response to easing inflation underscores a prudent approach to managing economic risks.

Australia's government's commitment to endorsing a minimum wage increase in line with inflation reflects a proactive response to the ongoing challenges faced by low-income families. By prioritizing the economic well-being of vulnerable segments of society, policymakers aim to foster inclusive growth and resilience in the face of evolving economic dynamics. As the nation navigates through uncertainties, a concerted focus on promoting equitable economic outcomes remains paramount for ensuring sustainable prosperity for all Australians.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

ING

Forex

USD: At least China us holding the line in FX

On Friday, we released our FX Talking monthly update for March. We rather put our necks on the line by emphasising (albeit a long-held view) that the dollar would start to turn lower in the second quarter. What did not help that release was the stronger dollar on Friday, where markets were speculating that the People's Bank of China (PBoC) might have taken a decision for one of its episodic bouts of CNY depreciation – a move which generally carries Asian FX with it and provides support to the dollar globally. Fortunately, the PBoC has today pushed back against ideas of a CNY down-leg by delivering a stronger CNY fixing. There have also been reports of state banks selling dollars – all pointing to the view that Chinese authorities prefer a stable renminbi as it works through economic challenges at home.

The support to the renminbi has helped to limit Friday's advance of the dollar, as has some quite aggressive verbal intervention in support of the yen from Japanese officials. Many in the market doubt Japan will intervene to sell FX at 152, with 155 seen as a more likely level. The core view here remains that it will have to be a dovish Federal Reserve and a weaker dollar that turns USD/JPY lower. A hawkish Bank of Japan (BoJ), where implied JPY yields through the forwards are still negative, is simply not enough.

Onto this week. Friday is a public holiday in many parts of the world but still features the key release of the week, the US core PCE deflator for February. There is a strong consensus behind a 0.3% month-on-month reading, which will not be good enough for the Fed's disinflation narrative. However, this week also sees quite a few Fed speakers. We would highlight the influential Christopher Waller speaking on Wednesday and Fed Chair Jerome Powell speaking on Friday We want to hear if the Fed has more to say about faulty seasonals making early-year inflation prints look too strong, a theme introduced by Chair Powell at last week's FOMC press conference.

A surging US stock market and the implications for US confidence and consumption make it hard to argue with the dollar right now, warning that DXY can push up to the 105.00 area. But we continue to expect this strength to be temporary and would prefer to position for a second-quarter downtrend.

CEE: Spike in rates should overwhelm stronger US dollar

Labour market data in Poland and consumer confidence in the Czech Republic will be published today. Tomorrow, we will see this week's highlight in the CEE region – the National Bank of Hungary (NBH) meeting. We expect a 75bp cut to 8.25%, which is also the result of the surveys. However, the situation is more complicated given the amount of noise in recent weeks and EUR/HUF near the key 400 level. On Wednesday, Hungary will release labour market and current account data. On Thursday, we will see the final fourth quarter GDP numbers in the Czech Republic. This includes the wage bill, which will be of interest to the central bank. On Friday in Poland, we will see the release of March inflation, the first number in the CEE region. We expect a strong decline from 2.8% to 2.0% year-on-year, below market expectations, marking this year's inflation low before a rebound later.

Late last week, CEE FX was hit by a stronger US dollar, which rebounded after Wednesday's Fed meeting, making a rally in the region more difficult. Still, we see PLN and CZK undervalued at current levels and remain positive here. Both currencies have disconnected significantly from last week's rate developments and are following the US dollar more closely, which should be reversed the further we get from the Fed meeting. Therefore, we see EUR/PLN below 4.300 and EUR/CZK closer to 25.20. HUF remains fragile in our view, but we expect the NBH to try to deliver a hawkish message given EUR/HUF levels which could support the short-end of the curve and FX. However, given the unclear environment, we are rather neutral here.

EUR: Mixed messages from the ECB

Despite EUR/USD being back at 1.08, the European Central Bank's trade-weighted euro has been doing reasonably well over the last month and is up around 1.5%. Looking at positioning amongst the speculative community, positioning is still net long euro – although asset managers did chop around 10% of their euro net longs in the latest reporting week. Net euro longs in this community have been pared back to levels last seen in November 2022 and are down around one-third from their peak last May. A better balanced market?

Following last week's surprise cut from the Swiss National bank, there has been increased scrutiny on ECB communication. This remains mixed, with one hawk on Friday still talking up the chances of an April rate cut. Notably, money markets still ascribe a very low probability to such an outcome and we doubt that changes much this week given the absence of key data. EUR/USD remains fragile, but at least the steadier story for the renminbi will discourage aggressive sales of EUR/USD through 1.0800.

Elsewhere, we have a Riksbank meeting this week. We like the Swedish krona on a medium-term basis, but are a little wary this week that the Riksbank will struggle to push back against market pricing of the first rate cut in May.

GBP: BoE turns more dovish

Sterling is consolidating at slightly lower levels after the Bank of England's dovish bout of communications late last week. Thursday's dovish statement and minutes were backed up by an interview from Governor Andrew Bailey in the Financial Times on Friday. Here, he implied that multiple rate cuts would be coming through this year. That dovish turn from the BoE helps cement the 0.8500 floor for EUR/GBP – which now can work its way slowly towards the 0.87 area over coming month. Given our dollar view, we are not too bearish on GBP/USD and would expect some decent demand to emerge under 1.2600.

Risk Warnings and Disclaimers

Add to Favorites

Cohen

Economic

Stocks

BBVA's share price has more than trebled since late 2020, narrowing its valuation gap to Santander and highlighting a divergence in fortunes between the Spanish banks that may be short-lived.

Both trace their roots to 1857 and neighbouring northern Spanish cities, but Santander emerged as the dominant bank in Spain with more than twice the assets of BBVA and, until very recently, a far larger market capitalisation.

But the gap has narrowed from 20 billion euros ($22 billion) three years ago to around 5.5 billion euros, raising questions about which has got their strategy right.

The shift reflects how investors are rewarding banks which share more of their resurgent profits than those prioritising investment in future growth, as well as those that made the right bets outside slower-growing Europe.

Shares in BBVA, which is worth some 64 billion euros compared with Santander's market value of 69.5 billion euros, have been buoyed by its Mexico subsidiary, which has around a quarter of the retail market.

"BBVA has in Mexico one of the best retail bank franchises in any emerging market and it is faring even better for BBVA than Brazil for Santander," said Enrique Quemada, chairman of investment bank ONEtoONE Corporate Finance Group.

Investors have also rewarded BBVA for deciding to quit the United States in November 2020 to focus on handing more cash to shareholders, analysts and investors told Reuters.

"For growth, profitability ... growing dividends, and share buybacks, the market continues to reward us," BBVA Chairman Carlos Torres told shareholders this month.

Torres has been chairman since the end of 2018, when Onur Genç became BBVA CEO.

Since 2021, BBVA has distributed 13.19 billion euros to shareholders, including extraordinary buybacks of 4.16 billion euros. This equates to 20.6% of its current market valuation, Reuters calculations show.

A more cautious approach to handouts under Santander Executive Chair Ana Botin, falling profitability in Brazil and mixed fortunes in some of its 10 main markets have hobbled the larger bank's shares, analysts and investors added.

Botin, whose father Emilio previously ran Santander, has been in the role since his death in September of 2014.

Santander, which unlike BBVA does not make extraordinary buybacks, has paid out 12.8 billion euros, 18.4% of its market capitalisation, Reuters calculations show.

A focus on distributing capital has lifted shares of other European banks such as Italy's UniCredit, while stocks with less generous payout policies including Santander and BNP Paribas have been left lagging.

Santander's Chief Financial Officer Jose Garcia Cantera told Reuters that an investor preference for payments today during a period of high interest rates rather than heavily discounted future profits will not last as rates fall.

"Future growth will be more valued ...We are starting to see the first signs of that," Cantera said.

BBVA declined to comment. Spain's Battle of the Banks as BBVA Narrows Gap to Santander_1

More Diversified

Although BBVA cannot compete with Santander for reach and scale, its shares trade at more than 1.2 times book value thanks to a 32.5% jump so far in 2024.

Santander's shares are up 15.5% over the same period but trade at just over 0.7 times book value, in the bottom third of large European banks, LSEG data shows.

"For Santander you have so many moving parts ... you need a lot of stars to align," said London-based Berenberg analyst Michael Christodoulou, who expects it to benefit as falling rates ease asset quality concerns, including in Brazil.

Christodoulou has a 'hold' recommendation on both banks.

Whether BBVA shares maintain their momentum will depend as much on capital returns as on whether it can meet its financial targets in its core Mexican and Spanish markets, given its bigger exposure to fewer countries than Santander.

BBVA makes more than two-thirds of its profit in emerging markets and is re-investing in fewer businesses than Santander.

BBVA expects a return on tangible equity (ROTE), a measure of profitability, of between 17% to 20% in 2024 from 17% in 2023, while Santander is targeting a ROTE of 16% in 2024, up from 15.06% last year.

Analysts at broker Alantra expect Santander to benefit in the medium to long-term from cost-savings with the roll-out of global units and to deliver faster profit growth.

Improving performance at Santander's autos lending business in Europe and the U.S. should help too, they predict.

Yet Santander must improve profitability in Brazil, other analysts say, adding that its U.S. expansion plans need to pay off following a 48% fall in 2023 net profit there.

To keep BBVA at bay, Santander should become more aggressive on buybacks, said Caixabank analyst Carlos Peixoto, adding: "but at this stage they are not in a position to do so."

Santander's core Tier 1 fully loaded capital ratio, the strictest measure of solvency, stood at 12.26% at the end of last year, compared with BBVA's 12.67%.

On March 22 Santander said it expects to pay more than 6 billion euros in dividends and ordinary share buybacks against 2024 results under its policy of distributing half of its earnings to shareholders.

Santander's strategy of investing in a more diversified range of businesses will be rewarded over time, Cantera said.

"As things turn around and the market starts valuing growth more, those banks that didn't invest for the future are going to be at a disadvantage," he added.

($1 = 0.9245 euros)

Source: SaltWire

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Samantha Luan

Forex

Economic

After posting an intermediate low of 1.1507 on December 28, the Pound to Euro exchange rate began the year on the front foot, embarking on a rally that lifted it up to an eighteen-month high of 1.1758.

Since then, it has been caught in a range, with seemingly solid support at 1.1668. Prior to last week's slide, it hadn’t closed below its 50-day moving average since January 2.

Thursday saw the exchange rate make a decisive close below the 50-day moving average, signalling a period of resilience had come to an end and that lower levels than we have been used to of late are in prospect.

"The relatively dovish noises that emerged from the latest meeting of the Bank of England’s Monetary Policy Committee prompted a 0.46% drop relative to the single currency – its largest one-day decline in three months – and that took it through the bottom of its range and to a nine-week low," says Bill McNamara, head of analysis at The Technical Trader.

Pound to Euro Week Ahead Forecast: Downside Likely Limited_1

The market raised the odds of a June rate cut last Thursday after two members of the MPC dropped their votes for a hike while the Bank said in guidance that modest rate cuts would not risk boosting inflation.

Note that if the Bank were to cut in June, it would do so alongside the European Central Bank, which suggests limited divergence potential in terms of interest rate policy.

This should contain the Pound's losses, and a return into the January-March range is possible over the coming days and weeks.

"Given that it already looks short-term oversold – the 40.4% reading on its 14-day RSI is a new low for the year - the scope for further weakness might be limited at this point, and support is possible at 1.161 or so, which is where its 200-day MA now stands," says McNamara.

He adds that should this give way, the next level would be at 1.159 or so.

Looking at this week's schedule, a speech by Catherine Mann on Monday will be interesting, given she was one of those Monetary Policy Members who voted for the Bank of England to maintain rates at 5.25%, having voted for a hike in February.

The market considered her vote switch and that of Jonothan Haskel a clear signal the Bank is closing in on a rate cut. Her justifications should shed some light on how fast and far the upcoming cycle will proceed, which could have a bearing on FX.

In the Eurozone, Spain will release inflation figures on Wednesday.

Spanish inflation tends to lead that of the Eurozone due to fast pass-through effects and could offer a clue as to whether the disinflation trend across the broader Eurozone is still intact.

"We continue to think that the GBP would do relatively better vs the EUR that could remain vulnerable to any potential downside inflation surprises in coming days," says Valentin Marinov, Head of FX Research at Crédit Agricole.

The Eurozone-wide inflation figures would also be released this week were it not for the Easter holidays and they will be released early the following week.

"The inflation data in particular will be closely scrutinised by FX investors as it could be instrumental for the outcome of the 11 April ECB policy meeting. In that, any downside surprises could corroborate the market expectation that the Governing Council would start preparing the ground for a potential rate cut as soon as the June policy meeting. In turn, the build-up of market ECB rate cut expectations could intensify and once again worsen the EUR’s rate disadvantage," says Marinov.