irst off we had the latest set of inflation data for February, seen as the biggest economic data release in the US ahead of next week’s crucial Federal Reserve meeting. Headline inflation printed in line with expectations at 2.2%, defying expectations among some analysts for an even faster pace of price growth. The market viewed this as a sign that the Federal Reserve would continue to raise interest rates at a gradual pace this year, with Fed fund futures showing a lower probability of four hikes in 2018 following the release.

Another sacking in Trump’s cabinet further worsened sentiment towards the greenback, given much of the market took a dim view of his new appointment. Trump announced he was replacing Secretary of State Rex Tillerson with anti-immigration CIA Director Mike Pompeo, seen by many investors as a poor choice for the role and stoking additional concerns over the high turnover in the President’s administration.

Attention in the US now turns to this afternoon’s retail sales data, which is expected to show a modest uptick from January’s flat reading. However, with politics dominating, the reaction in the greenback is likely to be fairly limited.

Hammond announces upgraded GDP growth forecast

A modest upgrade in UK growth forecasts from Chancellor Hammond and a broad sell-off in the US Dollar help lift the Pound by almost one percent to just shy of the 1.40 mark, its highest level in over two weeks.

Chancellor of the Exchequer Philip Hammond delivered his semi-annual economic update in parliament just after midday yesterday. Sterling received some support for an upgrade in growth forecasts from the Office for Budget Responsibility, which now predicts the UK economy will expand by 1.5% in 2018, up from the 1.4% predicted in November. Hammond claimed that Britain had reached a turning point and that there was a ‘light at the end of the tunnel’. Forecasts for 2019 and 2020 were left unchanged from November estimates at 1.3%.

The European Central Bank will take centre stage in the currency markets with a number of senior members on the bank’s Governing Council, including President Mario Draghi, set to speak today. Draghi will be making an address in Frankfurt at 8:00 UK time.