Morning Report: 09 December 2014

9th December 2014 By: Ranko Berich

GBP Sterling was one of the few currencies to mount a defence against the ascendant United States dollar yesterday, and actually managed to post some modest gains. Today’s release of Industrial and Manufacturing Production growth rates for October come at a key time for sterling, with recent survey data from the manufacturing sector showing that activity is showing signs of recovery. Sterling has dropped almost 10% against USD since July, mainly on cooling economic data and a more dovish Bank of England. A renewed surge in the manufacturing sector has the potential to prove that sterling’s demise has been overplayed by markets. Manufacturing and Industrial Production will be released at 09:30 GMT. Later in the afternoon, the National Institute of Economic and Social Research will release its estimate for Gross Domestic Product growth in November, which will give further insight in to the recent uptick seen in UK data.

EUR The euro clawed back some of its recent losses against the dollar late yesterday and this morning, but remains at weak levels against both the greenback and sterling. German Industrial Production continued to show signs of green shoots yesterday, growing as expected. Research agency Sentix released its measure of Investor Confidence, which was less negative than expected. This is not a fantastic result given that the surveyed investors were still pessimistic on the whole, but slightly encouraging given the results nonetheless were not as bad as expected. This morning, French and German Trade Balance Data was released, showing that Germany’s surplus had grown even more than expected to an impressive 20.6 billion euros, while France’s deficit remained a manageable 4.6 billion. Given the euro’s weakness, the favourable trends seen in exports can be expected to continue, giving these and other eurozone economies a desperately needed boost.

USD This morning has seen the first small wobbles in the United States dollar, after several days of rampant strength triggered by Friday’s strong jobs data. The only data of note yesterday was the Labour Market Conditions Index, which is a composite of 19 labour market indicators including participation, unemployment, earnings, and the difficulty of filling positions. The index fell slightly to 2.9, but still indicates overall growth. It’s worth noting the measure is almost brand new, having only been released for the first time in October of this year, has the potential to become a useful barometer for the labour market. This afternoon will see ample US data, with the Small Business Index due out from the National Federation of Independent Businesses at 12:30 GMT. The Job Openings and Labour Turnover Summary will be released at 15:00 GMT and will be another useful measure of tightness in the labour market. Also out at the same time will be a gauge of Economic Optimism released by magazine IBD, and official Wholesale Inventory numbers.

CAD The Canadian dollar has stabilised after weakening dramatically yesterday against USD and reaching its weakest point since 2009, in the early hours of this morning. Some rather lukewarm housing data was released yesterday, but most of the movement in CAD was driven by a wider rout in emerging market and commodity driven currencies. Crude oil continues to plummet, and reached yet another multiyear low this morning, something that is driving further CAD weakness. Although the Canadian dollar’s demise will be painful for importers, given the importance of the Canadian export sector, loonie’s weakness is not only necessary, but actually a welcome development for the economy as a whole.

UK news

  • Reuters. ‘Black Friday’ discounts boost retail sales in November – BRC: A “Black Friday” shopping spree pushed British retail sales growth to a three-month high in November as shoppers splashed out on household goods and furniture, according to an industry survey on Tuesday.
  • Daily Mail. Confidence among businesses for taking on new workers hits 10-year high, with every UK region and sector expecting to hire: Confidence among businesses to take on more workers is at a ten-year high, said recruitment group Manpower.
  • BBC. Inequality ‘significantly’ curbs economic growth – OECD: Income inequality has a “statistically significant impact” on economic growth, according to research by the Organisation for Economic Co-operation and Development (OECD).