Morning Report: 06 March 2015

6th March 2015 By: Ranko Berich

GBP Sterling’s losses against USD stabilised yesterday, while the beleaguered euro fell to yet another multi-year low. The Bank of England left its key interest rate unchanged yesterday, making this the 72nd consecutive month of low, stable interest rates. Today at 09:30 GMT, Consumer Inflation Expectations will be released.

EUR The euro’s nosedive over the last week has been so sharp that the question now is when its losses will finally be stemmed. Yesterday saw more fresh lows against USD and GBP, with EURUSD reaching its lowest point since 2003. After more than a year of speculation, the final details of the European Central Bank’s quantitative easing programme were announced by President Mario Draghi. Interest rates were left unchanged as part of the ECB’s regular meeting, but Draghi outlined the programme that would start on Monday. The ECB will flood eurozone markets with cash, buying government and select corporate bonds worth 60 billion euro per month. The fact that yields are already negative across many of the assets in question will not dissuade Draghi, who promised to buy bonds up until their yields were equivalent to the ECB’s already negative deposit rates. There was also a note of satisfaction in Draghi’s address, as he noted that simply the promise of QE had raised business and consumer confidence in the eurozone. Today at 10:00 GMT, the latest Gross Domestic Product growth figures for the eurozone will be released.

USD USD had a good day yesterday, amid a spattering of medium importance data releases in the afternoon. Weekly Unemployment Claims rose to 320,000, a largely meaningless change. In the meantime, Unit Labour Costs data showed a 4.1% quarter on quarter increase in the price businesses paid for labour in Q4 2014, yet another encouraging sign of tightness in the labour market. Factory Orders data for January showed their sixth straight fall, disappointing expectations for a slight improvement. Softening demand in Europe and a strong dollar are both weighing on the manufacturing sector, but there is cause for some optimism, as the contraction was slower than those seen in recent months and there were increases in certain important areas that relate to business investment. Today remains by far the most important day on this week’s US economic calendar, due to the release of the Non-Farm Payrolls report at 13:30 GMT. Jobs creation has been nothing short of rampant over the last couple of months, and expectations are high for today’s report despite the prospect of cold weather damaging the labour market somewhat. Also out will be Average Hourly Earnings data and the US Trade BAlance, which will also be closely watched.

CAD USDCAD is still range bound, and yesterday’s trading saw mild CAD strength helped along by some relatively optimistic survey data. The Ivey Purchasing Managers Index rose to 49.7, just shy of the 50 reading that indicates overall optimism among the survey respondents. Today at 13:30 GMT, Building Permits, Trade Balance, and Labour Productivity data will be released, potentially providing more momentum for CAD.

UK news

  • FT. Bank of England keeps interest rates on hold: The Bank of England has kept interest rates on hold, marking the sixth anniversary of ultra-loose monetary policy.
  • Reuters. UK hiring for permanent jobs grows at fastest in four months – RE: The number of Britons finding permanent jobs through recruitment agencies grew in February at the fastest pace since October and stiff competition for candidates continued to push up starting salaries, a survey showed on Friday.
  • Telegraph. Banks borrowed up to £180bn from BoE under auctions probed by SFO: The Serious Fraud Office’s investigation into the Bank of England’s crisis-era liquidity auctions is believed to relate to a £180bn funding scheme that was ended by the BoE in 2010.