Dear Reader,

Here is an overview of today's economic news and market action:

• Positive mood on markets persisted yesterday …
• Currency-wise, the euro was in the ascendancy …
• Dollar and yen remained under pressure also …
• EUR/USD opens this morning at $1.09 mark …
• GBP/USD is in the top half of $1.23-1.24 …
• EUR/GBP is operating just below the 88p handle …
• Eurozone flash HICP inflation (Mar) and US core-PCE inflation (Feb) due today …

Economic data have generally surprised to the upside in first quarter, helped by easing inflation. However, possible credit crunch and tighter lending standards new risk to activity

Central banks continue to hike rates, but expectations of further increases scaled back greatly on signs of stresses in parts of banking system and associated turbulence on financial markets

Inflection Point

• The stresses that have emerged in parts of the global banking system, and the associated volatility this has generated on financial markets are weighing on central bank’s monetary policy decisions.
• Meantime, we have already seen a tightening of financial market conditions and lending standards for loans in the past year

The stresses that have emerged in parts of the global banking system, and the associated volatility this has generated on financial markets are now weighing on central bank’s monetary policy decisions. The US Fed, in particular, is clearly worried about the economic implications, having mulled not increasing rates at all, at last week’s policy meeting.

The March meeting of the ECB’s Governing Council saw the central bank raise rates by 50bps, which brings the key deposit rate up to 3%. 

BoE hikes by 25bps, and retains a tightening bias

The March meeting of the Bank of England’s Monetary Policy Committee (MPC) saw the central bank announce a 25bps rate hike. The voting breakdown showed that the MPC continued to be split on its rate decision.