MORNING REPORT: 03 MARCH 2015

3rd March 2015 By: Ranko Berich

GBP Despite some optimistic data, sterling could not hold on to all of its gains against the euro yesterday, and retreated somewhat. Purchasing Managers’ Index Survey data from the Manufacturing sector showed growth accelerating. The PMI itself rose to 54.1, its highest level in seven months. Growth was driven by domestic demand, which overshadowed a fall in export orders. Money Supply data was also released yesterday, by the Bank of England. Headline M4 Money Supply contracted on a month on month basis, but loans to businesses grew substantially, as did mortgage lending. Overall, the money supply data support the idea that the UK economy is recovering, but suggest that credit growth to non-financial corporations remains rather sluggish. Today at 09:30 GMT, construction Purchasing Managers Index data will be released. At 10:00 GMT, Bank of England Governor Mark Carney will testify before Parliament’s Treasury Select Committee.

EUR A fair amount of euro data was released yesterday, most of it positive, but this was good for only a small rally in the euro, which managed to claw back only a small part of its recent losses. Manufacturing Purchasing Managers’ Index data was released for Spain, Italy and the eurozone as a whole, showing the manufacturing sector remained in growth mode. The Consumer Price Index showed inflation remained negative at -0.3% year on year, a marginal improvement from the sharp 0.6% contraction reported previously. Once the effects of food and energy prices are taken out, core inflation was stable 0.6% year on year, well shy of the European Central Bank’s 2.0% target. Today at 10:00 GMT, Producer Price Index data will be released.

USD Expectations are high for the United States economy at present, and yesterday saw multiple data released that fell short of forecasters’ estimates. The dollar was largely resistant to any weakness. Personal Spending contracted in January, for the second consecutive month, as consumers cut back after a spending spree over the holiday period. Incomes continues to rise, as did prices for Personal Consumption Expenditure items. ISM’s Manufacturing Purchasing Managers Index fell slightly short of expectations, as did Construction Spending which recorded a surprise fall. Today will be light on data from the US, although research company TIPP will release its Economic Optimism index at 15:00 GMT.

CAD Loonie has been relatively flat this week, ahead of today’s important data releases. Canada’s current account fell further into deficit in December, with trade in goods showing the first deficit since 2013. Falls in exports due to plummeting crude oil prices led falls in exports. Today at 13:30 GMT, monthly Gross Domestic Product Growth data will be released together with Price Indices for Raw Materials and Industrial Products.

UK news

  • FT. Pay gap between London and rest of UK narrows: Workers who live in London have suffered a worse wage squeeze than those in any other UK region since the crash, even as the capital’s economy seems to have rebounded more strongly than the rest of the country.
  • FT. UK manufacturing shows signs of rebound: Activity at Britain’s manufacturers has begun to bounce back from a weak patch in the autumn, reflecting rising output and new orders.
  • Reuters. Consumers drive UK economy in Q3 despite weak incomes: Spending by households drove Britain’s economic recovery once again in the third quarter despite a slight fall in disposable incomes and weaker business investment growth than previously reported, official data showed on Tuesday.
  • Reuters. Top UK economic forecaster says sharp inflation rise a risk: British inflation may rebound more sharply than many people think if economic growth picks up, according to the most accurate forecaster in Reuters Polls on 2014 UK economic data.
  • 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.
  • Telegraph. CBI warns mid-sized firms are still locked out of funding: Business group calls for next Government to do more to encourage private placements to raise corporate funds.