Tentative Black Sea Ceasefire, Lower-Than-Forecast British Inflation & Chancellor Reeves to Augment Spending Cuts – Currency Thoughts
Tentative Black Sea Ceasefire, Lower-Than-Forecast British Inflation & Chancellor Reeves to Augment Spending Cuts
March 26, 2025
A tentative U.S.-brokered deal to end Black Sea combat and attacks on energy infrastructure has been announced between Ukraine and Russia, provided the U.S. reduces economic sanctions against Putin’s state.
British Chancellor of the Exchequer Reeves is now delivering her Spring Economic Statement, updating forecasts and unveiling additional spending cuts. Separately, British February CPI figures didn’t quite spike as much as feared. Both total and core consumer prices rose 0.4% on month, resulting in 12-month increases of 2.8% and 3.5%, which were actually below January numbers and less than analysts had been forecasting. Retail prices rose 0.6% on month but slid to a 4-month low inflation rate of 3.4% in year-on-year terms.
The dollar in overnight action fell 0.5% against the kiwi, 0.4% versus the Australian dollar, and 0.2% vis-a-vis the euro but rose 0.3% against sterling and the Mexican peso and 0.1% relative to the Japanese yen.
The 10-year U.S. Treasury yield climbed three basis points in contrast to a 2-basis point drop in the 10-year British gilt yield. Sovereign debt yields in Japan, Germany, Spain, Italy and France are unchanged from Tuesday closing levels.
Equity markets rebounded sharply in Indonesia and also rose today by 1.2% in New Zealand, 1.1% in South Korea, 0.7% in Japan and 0.6% in Hong Kong, but loses were booked in India of 0.8% and in Taiwan of 0.1%. European stock markets are lower so far, and U.S. stock futures show nil change.
Prices are higher for Bitcoin (+0.8%), 0il (0.9%) and gold (0.2%).
U.S. mortgage applications fell last week for the fourth time in the last six weeks but on balance have risen 13.6% over that entire period. Last week’s 30-year fixed mortgage rate was just 4 basis points above the 13-week low seen in the first week of March.
U.S. data released yesterday featured another sharp drop in the Conference Board’s consumer confidence index to a 50-month low of 92.9 in March from 100.1 in February and a recent high of 112.8 recorded last November. House price inflation in January printed at 4.7% according to the Case-Shiller survey and 4.8% on the FHFA index, and the March Richmond Fed manufacturing index dropped to a reading of -4 from +11 a month earlier.
The proposed Australian fiscal 2026 fiscal budget includes A$ 6.7 billion of new tax cuts and shows a deficit of about A$ 28 billion.
The National Bank of Hungary‘s policy interest rate was left unchanged at 6.5%. The most recent change, a 25-basis point cut last September, culminated 425 basis points of reduction in 2024 on top of 225 bps of reduction in the final quarter of 2025. Hungarian CPI inflation of 5.6% in February was above the medium term target range of 2-4%. A recently appointed new governor of the central bank is expected to cooperate with President Orban’s preference of looser monetary policy than his predecessor allowed.
French consumer confidence dipped a point to a 2-month low in March, While Swedish consumer sentiment dropped 4.8 index points to an 11-month low. Swedish business confidence fell 3 points to a 4-month low, whereas business sentiment in South Korea improved to a 4-month high.
Investor confidence in the the Swiss economy swung from a 10-month high of 17.7 in January according to the ZEW expectations index to a 3-month low of -10.7 in March.
Dutch GDP growth last quarter was reconfirmed to have risen 0.4% from 3Q and 1.9% in year-on-year terms, which was the best result in seven quarters. On average, GDP climbed only 1.0% in 2024. A current account surplus in the Netherlands last year of EUR 112.7 billion was about 7% wider than the 2023 surplus.
Spanish GDP growth last quarter was left unrevised at 0.8%. GDP was 3.4% higher than in the final quarter of 2023 and posted a larger increase for all of 2024 (3.2%) than even U.S. GDP.
Corporate service prices in Japan were unchanged on month in February, resulting in the smallest year-on-year pace (3.0%) in five months. Japan’s index of leading economic indicators for January was revised a bit higher, but the index of coincident economic indicators got bumped somewhat higher.
In yet another example of U.S. hard economic data outperform soft survey-compiled measures in these early days of the Trump presidency, U.S. durable goods orders rose 0.9% last month after an upwardly revised 3.3% increase in January. Durables in the first two months of 2025 were 2.3% above their year-earlier level, including a 5.3% on-year advance in the core index of non-defense capital goods orders excluding aircraft.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British consumer prices, Japanese corporate service prices, National Bank of Hungary, U.S. durable goods orders
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