MORNING REPORT: 02 MARCH 2015

2nd March 2015 By: Ranko Berich

GBP After having posted fresh calendar-year highs against the US dollar last week, sterling has, like most of the market, retraced sharply in light of a fresh uptick in economic data from the US. However, sterling does continue its inexorable march higher against the euro, with yet further fresh seven year highs being charted on Friday. Today, manufacturing data is set for release at 9.30am GMT, and is expected to post a mild uptick of 53.5, from last month’s 53.0.

USD The US dollar gained sharply against almost all its major peers by the end of last week, with better-than-forecast GDP data crowning a very strong week for the greenback. Despite the figures showing that economic growth in the US slowed sharply in the last three months of 2014, to a 2.2% final reading from 3.9% for Q3, markets still bought in to the US dollar in light of the data release as it beat the 2.0% forecast. The numbers showed that a widening trade deficit is hurting the economic performance of the US, however, economists nonetheless are expecting the economy to rebound back over 3% for the forthcoming year. More importantly, with Federal Open Market Committee member James Bullard reaffirming last week that a stronger dollar would not influence the Fed’s policy decisions, markets are happy to continue to buy in to the greenback, with a 2015 rate hike now looking an inevitability.

EUR  Despite the feared “Grexit” not materialising- for now- markets still continue to hammer the beleaguered single currency, with EURUSD now back perilously close to levels not seen since the formative years of the euro. The problem for Europe is that widespread fears remain over the impact of the prospective quantitative easing programme, which, combined with the emergence of negative interest rates in the currency bloc, have led to record numbers hedging out their exposure to the euro, despite European equity markets being very much back in favour. Today, at 10am GMT, we have year-on-year inflation estimates due out, which is expected to show inflation in the Eurozone being at -0.5%, highlighting the economic malaise the economic union is currently facing.

CAD  The USDCAD rate continues to fluctuate violently, with Brent crude oil once more failing to break above its key technical level of $63 a barrel last week. Nonetheless, oil prices are undoubtedly on an upward trend, which, if it continues should provide a source of support for the Canadian dollar over coming months. However, for now, the economic fundamentals in Canada continue to be far outperformed by its largest trading partner, and as a consequence, the general trend for USDCAD remains higher.

UK news

    • FT. UK export orders to Europe picking up, say manufacturers: British manufacturers are starting to see the first signs of a pickup in European export orders, raising hopes that a long-awaited improvement in trade is on the horizon.
    • Reuters. Annual house price growth weakest since September 2013: British house prices fell in February for the first time in five months, taking the annual rate of increase to its lowest since September 2013, figures from mortgage lender Nationwide showed on Monday.
    • Forbes. British wage growth has turned around: British wage growth has turned around and will feed through to higher inflation at some point, meaning the Bank of England will have to start thinking about raising interest rates, policymaker Kristin Forbes said in an interview published on Friday.