The Day Ahead: Lloyds Bank

Lloyds Bank notes the day ahead as follows...

• Coming in the aftermath of the Budget, public finance data for February will provide relatively little incremental insight into the medium-term outlook, but should confirm a pattern of improvement towards the end of the 2014/15 fiscal year. A strong outturn for receipts in January, benefiting from seasonally-strong self-assessment returns, is likely to also spill over into February, not least because the self-assessment deadline fell on a weekend. We look for net borrowing of £6.9bn on the ex-banking measure, lower than the £9.9bn recorded for February 2014. If realised, this would reduce the full year deficit projection in the Budget (£90.2bn) by another £2bn, assuming the improvement is not reversed in March. Additionally benefiting from incremental disposals of the Government's stake in Lloyds Banking Group, the public sector net cash requirement is likely to add to January's £18.9bn repayment, with a further cash surplus of £1.5bn on our estimates. 
  
  
• The ramifications of Wednesday's FOMC meeting continue to reverberate across financial markets. After sliding in the immediate aftermath, the US dollar regained its poise yesterday, underscoring the positive momentum  behind the currency. Markets will be looking for further insights on Fed policy today, with two voting members (Lockhart and Evans) speaking on monetary policy this afternoon.
• Elsewhere, Canadian retail sales and CPI inflation will draw some attention. The headline rate of inflation is forecast to have slowed further to 0.9% in February, its lowest since November 2013. However, the core rate is still holding at relatively high levels, and any signs of softening here could elicit more market reaction. Retail sales look poised to register a further drop in January after the sharp 2% slump in December as the uncertainty around commodity markets continues to weigh on sentiment.