Morning Report: 10 April 2015

10th April 2015 By: Ranko Berich

GBP An increasingly rosy economic picture offered little support to sterling yesterday, and GBP weakened against USD amid volatile trading. Uncertainty due to the General election may be weighing on sterling, with conflicting poll results clouding the likely outcome of the election. A survey of 400 companies by the Recruitment and Employment Confederation found that advertised salaries are beginning to increase, good news ahead of next week’s crucial official wage data. Today at 09:30 BST, Manufacturing Production Data will be released together with Construction Output and Industrial Production, providing a good direct look at economic growth.

EUR The euro is once again on the move, with large downwards moves against the dollar seen yesterday and this morning. Asset yields are falling as the European Central Bank’s quantitative easing programme continues, adding to pressure on the euro. Yesterday, German Industrial Production registered a 0.2% increase in February, after contracting in January. Given the euro’s weakness, it is unsurprising that Germany’s Trade Balance rose even further into positives in February, on soaring exports. Political posturing continued over the Greek debt crisis yesterday, as Greece moves to complete a list of reforms that it proposes making in exchange for financing. Negotiations are likely to continue to be antagonistic, given that Greek demands for German war reparations have been poorly received this week.

USD Yesterday saw a move back towards general bullishness on the United States dollar, defying the recent tide of soft data and a Federal Reserve that is now looking less likely to raise rates in June. The US Treasury made its semi-annual report on currency developments, highlighting better domestic economic conditions and a worsening outlook globally. Fiscal stimulus was urged by the Treasury, a measure that is politically untenable in many economies at present. Today at 13:30 BST, the Federal Open Market Committee’s Jeffrey Lacker will speak, and Import Prices for March will be released.

CAD CAD’s volatile ride continued yesterday, driven primarily by crude oil prices. Brent Crude Oil has seen a 6.45% swing in prices this week, as speculation increases that the North American oil market is flooded with supply. Crude oil markets are currently in deep contango, meaning that spot prices are below those on the futures market, encouraging traders to buy oil and store it. With Crude Oil inventories soaring it is possible that spare storage capacity will diminish and further falls in crude prices will ensue. Yesterday’s data showed that Building Permits had fallen 0.9% in February, after plunging 12.3% in January, developments largely related to the freezing winter Canada has experienced. Today at 13:30 BST, Labour Market data including the Employment Change and Unemployment Rate will be released.

UK news

  • FT. UK salaries rising for skills in short supply: After six years of falling real wages, data published on Friday suggest that advertised salaries are rising quickly in the UK for workers with scarce skills, but across-the-board pay settlements remain subdued.
  • FT. Weak UK trade data spark Q1 growth fears: The UK’s trade deficit worsened by far more than expected in February, underscoring the lack of progress in rebalancing the economy towards exports.
  • Reuters. Bank of England keeps rates on hold as it awaits inflation signs: The Bank of England kept interest rates at their record low on Thursday as policymakers wait to see whether a tumble in inflation is short-lived or turns into a bigger threat for the British economy.
  • Daily Mail. Fears of pre-election hit to UK property market have been overplayed, say analysts: Jefferies upgrades the whole UK residential property sector as “data points to a stronger pre-election housing market than we had anticipated.”