MORNING REPORT: 04 MARCH 2015

4th March 2015 By: Ranko Berich

GBP Yesterday was a spot of rare calm for sterling, and GBP traded within stable bands against EUR and USD. Rather optimistic Purchasing Managers Index data for the Construction industry was released, with enthusiasm rising amongst the surveyed managers as mortgage approvals increased. In the meantime, Mark Carney mounted a robust defence of the Bank of England’s forex probe before Parliament’s Treasury Select Committee, under allegations that the investigation did not take a hard enough line against suspicions of market rigging activity. Today at 09:30 GMT, the Services Purchasing Managers Index for February will be released.

EUR The euro once again flirted with collapse against USD yesterday, plumbing the bottom of its recent range before recovering slightly. German Retail Sales data for January was nothing short of spectacular, showing a 2.9% bump in retail sales month on month, after rapid 0.6% growth in December. In real terms, the data are even more staggering: once inflation is taken into account sales rose 5.4%. Given how desperate the eurozone is for upwards price pressure, robust consumer demand in Germany can be nothing but a good thing. Later in the morning, Producer Price Index data for January showed producer prices fell 0.9% month on month. This morning, Retail Sales data for Spain, Italy, and the Eurozone as a whole will be released at 08:15, 08:45 and 10:00 GMT. The Services Purchasing Managers Index for January will be released at 09:00 GMT.

USD The dollar was eyeing another breakthrough against the euro yesterday, amid scant data releases. Research Agency TIPP released its Economic Optimism Index, which showed an improvement in confidence amongst survey respondents. Today will be a busy day for USD, beginning with the 13:15 GMT release of ADP’s Non-Farm Payrolls, a monthly attempt by the research agency to guess the results of Friday’s all important official payroll report. At 14:00 GMT, Charles Evans of the Federal Open Markets Committee will give his views on the economic outlook and monetary policy, with questions expected. Evans is a voting FOMC member and so his opinions will be closely scrutinised. At 14:45, Markit Purchasing Managers’ Index data for the Services Industry will be released, followed by ISM’s Non-Manufacturing PMI at 15:00.

CAD Canada’s Gross Domestic Product grew faster than expected in December, but the news was not enough to stop CAD from depreciating yesterday. Grim Price Index statistics for Raw Materials overpowered the optimistic GDP data. The Raw Materials Price Index plummeted 7.7% in January, and Industrial Products fared little better. Today at 15:00, the Bank of Canada will announce its latest Overnight Rate, accompanied by a Rate Statement.

UK News

  • FT. Living standards set to bounce back to pre-recession levels: Living standards in Britain will finally return to pre-recession levels this year as workers benefit from improvements in the labour market and falling inflation, according to an influential think-tank.
  • FT. UK construction hits 4-month high: Building activity in the UK jumped to the highest level in four months in February, providing further evidence the economy has started the year on a good footing after a disappointing end to 2014.
  • Reuters. UK inflation expectations fall again to six-year low-Citi/Yougov: The British public’s expectations for inflation in the next 12 months fell to their lowest level in more than six years in February and longer-term inflation expectations were stable at a record low, according to a survey published on Tuesday.