Morning Report: 1 April 2015

1st April 2015 By: Ranko Berich

GBP General election campaigning began in earnest yesterday, while sterling strengthened noticeably. Britain’s National Accounts were revised by the Office for National Statistics, showing that the United Kingdom’s economy had grown faster than expected in Q4 2014, and that real household disposable incomes had edged up a tiny 0.19% since the coalition took power in 2010. This all sounds very good for the Tories, but Labour was quick to argue that the recovery has not actually made people in Britain any better off, as Gross Domestic Product per head remained below recessionary levels. The truth is, as usual, somewhere between these two positions: the UK has indeed emerged from a bad crisis, but growth has also been relatively slow and income growth has been sluggish, possibly due to tight fiscal policy. Campaigning continues today, and Manufacturing Purchasing Managers Index data will be released at 09:30 BST.

EUR The euro continued to soften yesterday, with the most noticeable moves being against sterling. Consumer Price Index data was released for March, and showed a slight improvement in inflation, something to be expected given the aggressive measures taken by the ECB to stimulate price pressure. Some Purchasing Managers Indices will be released this morning, with Italian and eurozone Manufacturing PMI’s due out at 08:45 BST and 09:00 BST respectively. Given the weaker euro and improving credit conditions across the euro area, an increase can be expected in both the statistics, as business optimism benefits from the ECB’s quantitative easing programme. |

USD Developments elsewhere led USD trading yesterday, and the greenback weakened against sterling while continuing to strengthen against the euro. The Chicago Purchasing Managers Index showed plummeting confidence amongst the surveyed business leaders, possibly due to negative effects from the strong dollar, or cold weather conditions. In the meantime, Consumer Confidence figures from research agency the Conference Board rose to their second highest since 2007. The Federal Open Market Committee’s Jeffrey Lacker summed up his outlook for the economy in a speech, making it clear his position was that June would be an appropriate time to begin raising interest rates. Ample US data will be out today, beginning with ADP’s monthly estimate of Non-Farm payrolls at 13:15 BST, followed by a speech from the FOMC’s John Williams. Manufacturing Purchasing Managers Index data from Markit and ISM will be released at 14:45 and 15:00 respectively, and Construction Spending data will be released at 15:00.

CAD CAD had a bout of weakness yesterday afternoon but quickly recovered to trade slightly stronger at the close of the day than it was at the start. Gross Domestic Product growth statistics for January gave little cause for optimism: data showed the economy contracted 0.1% over the month. Decreases in retail trade led the decline, while goods production actually rose, taking some of the edge off the figures. Oil and gas extraction, agriculture and forestry all increased, but actual manufacturing and construction output fell.

UK News

  • FT. UK economic growth revised up to 2.8% in 2014: UK economic growth for 2014 has been revised up to 2.8 per cent, giving the governing Conservative and Liberal Democrat parties a boost before May’s general election.
  • Telegraph. Business rates moratorium will cost firms £2.3bn: The Government’s two-year delay on recalculating business rates will hurt businesses everywhere in the UK, except London.
  • Guardian. Inflation may be at zero – but many household costs remain on the rise: Council tax, water charges and mobile phone bills all among living costs to have undergone price hikes this week despite inflation dropping to 50-year low.
  • Guardian. Weak pay growth prompts fresh productivity warning: Almost half of workers unhappy with employer’s pay decisions and even more feel left in the dark over how to secure a rise this year.