Hot UK inflation and US housing data amid central bankers' speeches

The European indices are set to rise again as cash returns to the beaten-up equity markets, mainly from the bond markets. With UK inflation hitting a record 30-year high last month, household finances have been squeezed to a historical level. Now finance minister Rishi Sunak is under pressure to ease that squeeze in Wednesday's budget update. According to the Office for National Statistics, consumer prices rose 6.2% in February after increasing 5.5% in January, the highest rate since March 1992. Sterling hit its highest level against the dollar for nearly three weeks at 1.33 as investors await Rishi Sunak's "spring statement" on the budget, due later today. 

BoE Governor is set to speak

The BoE Governor, Andrew Bailey, will deliver a speech on Wednesday. Investors are waiting to see how higher-than-expected CPI data will affect the central bank's outlook and monetary policy. After the last policy meeting, the Bank of England (BOE) adopted a hesitant tone regarding future rate increases. Although hot UK inflation puts the bank in a tough spot, the immediate market reaction suggests that investors are concerned about the negative impact of rising price pressures on economic activity.

Pound traders watching US data on Wednesday

The US economic docket will feature February New Home Sales later in the day. Also, the chairman of the FOMC, Jerome Powell, will make a speech during the BIS event. In the event that Powell does deliver something like more hawkish statements, the market may price in a policy divergence between the Fed and the BOE. This will place additional pressure on the GBP/USD pair. Investors have braced for central banks and the US Federal Reserve, in particular, to take aggressive measures to tame inflation.

Aussie maintains its strength on soaring commodities

The Australian dollar seems to be the best performer of the week so far. The Aussie hit its highest level since December 2015 versus the yen Wednesday and has gained 8% to date in March. The yen fell as low as 121.4 per dollar overnight as the greenback gained 1.1% against the Japanese currency. Since Japan relies heavily on imported oil, rising commodity prices will negatively impact the yen, widening the trade deficit. On Wednesday, rising equities and commodities prices contributed to the Australian dollar's resistance breaking at $0.745. Global risk sentiment also continues to affect the Australian currency's outlook.