Morning Report: 05 March 2015

5th March 2015 By: Ranko Berich

GBP Sterling was firmly in the back seat yesterday and seemed to mostly trade off developments elsewhere, while the euro collapsed and the dollar steadily advanced. Yesterday’s Services Purchasing Managers’ Index fell to 56.7 from 57.2, but remained well above the 50 reading that indicates overall growth. Today at 12:00 GMT, the Bank of England will announce its Official Bank Rate. No change is expected.

EUR The euro fell to pieces yesterday, surpassing the lows reached in January to reach its weakest level against USD since 2003. Today is the day that the ECB will announce the fine details of its asset purchase programme, and with a flood of easy money expected from the ECB and asset yields plunging across the eurozone it is little wonder the euro has weakened substantially. The question for today is: what’s on Mario Draghi’s shopping list? The European Central Bank President has promised a 1 trillion euro increase in the Bank’s balance sheet, but with yields low or negative across sovereign bonds in the eurozone, Draghi will be forced to look for opportunities where its actions will have the most impact. Institutional bonds are expected to be on the shopping list for this reason, and the details of which institutions are deemed up to scratch will be one of the details to look out for today. Almost as an afterthought, the ECB will announce its latest interest rates at 12:45 GMT, before Draghi’s press conference at 13:30.

USD The United States dollar had a good day yesterday, with some reasonably optimistic data releases in the afternoon. Research company ADP released its Non-Farm Payrolls report, which estimated that 212,000 jobs had been created in February , slightly less than expected. The predictive power of the report is dubious, and the decisive moment for USD this week remains the official Non-Farms report tomorrow at 13:30GMT. Also out yesterday were Purchasing Managers Indices for the non-manufacturing parts of the economy. Markit Services PMI was 57.1 for February, the fastest pace of activity growth in four months. ISM Non-Manufacturing PMI was similarly optimistic. Today at 13:30 GMT, weekly Unemployment Claims will be released together with Non-Farm Productivity and Unit Labour Costs. Later in the afternoon, the Federal Open Markets Committee’s John Williams will speak at 15:00 in Honolulu, while Factory Orders data for January will be released at the same time.

CAD CAD strengthened yesterday as the Bank of Canada held fire on further rate cuts, leaving its Overnight Rate unchanged. The BOC’s messaging has been slightly unclear of late, as Governor Stephen Poloz has expressed doubts about how much forward guidance should be given. The rate statement accompanying the decision was reasonably optimistic, but gave little hints as to what the BoC’s next move may be. Today at 15:00 GMT, the Ivey Purchasing Managers Index will be released.

UK news

  • Reuters. UK house prices fall in February – Halifax: British house prices fell in month-on-month terms in February for the first time since last October, mortgage lender Halifax said on Thursday.
  • Reuters. British services growth eases but hiring booms in Feb – PMI: Growth in Britain’s dominant services sector eased back in February but firms hired staff at the second-fastest rate on record, wages rose and new orders increased, a further sign that the economy has got off to a strong start in 2015.