US economic data and monetary policy will once again take centre stage on Monday. On the policy front, two officials at the Federal Reserve will shine the spotlight back on the central bank’s decision to raise interest rates last week.
Action begins in Europe at 06:00 GMT with a report on German import prices. Just 45 minutes later, the French government will deliver its quarterly report on GDP.
At 09:00 GMT, the Italian government will update the market on its trade balance with non-European Union countries.
In the United Kingdom, the British Bankers Association will deliver its monthly report on mortgage approvals at 09:30 GMT.
Shifting gears to the United States, the Federal Reserve Bank of Chicago will release the national activity index at 12:30 GMT. The monthly report is expected to show a slight uptick in national economic activity with a reading of +0.19.
Meanwhile, the Dallas Fed will release the manufacturing business index at 14:30 GMT. The monthly reading is expected to fall to 33.4 from 33.7 in February.
Federal Reserve Bank of New York President William Dudley is scheduled to speak at 17:30 GMT. Three hours later, Federal Open Market Committee (FOMC) member Loretta Mester is also scheduled to deliver a speech. Mester was on the policy board that voted to raise interest rates by a quarter point last Wednesday.
The Fed’s official rate statement left the door open to further policy tightening in the months ahead. The official dot plot summary of interest rate expectations also pointed to gradual rate hikes in the near future.
The euro is coming off a strong Friday session that was triggered by fresh losses in the US dollar. EUR/USD extended its gains on Monday, with prices climbing toward 1.2370. The pair has moved above initial resistance and is now poised to re-test 1.2413, which is the high from 14 March. On the opposite side of the ledger, immediate support is located at 1.2330.
Cable’s bullish upside continued last week, as investors reacted positively to Brexit developments. GBP/USD rose 0.2% on Monday to 1.4160. The bulls are looking at the 1.4218 level as the next major resistance test. A clean break above this level would lead to a re-test of the 1 February high of 1.4278.
Global risk aversion tied to last week’s epic stock market collapse sent gold prices to yearly highs on Friday. The yellow metal was little changed at the start of Asian trade but remains well supported around $1,346. With European and Asian stocks expected to fall hard on Monday, gold could be poised to extend its recent rally. A sharp reversal in the US dollar could also provide the catalyst for gold’s continued growth.