Morning Report: 11 March 2015

11th March 2015 By: Ranko Berich

GBP Sterling continued its upwards march against the euro yesterday, but there was not much else to report. Bank of England Governor Mark Carney testified before the Lords Economic Affairs Committee, and once again stated that headline inflation would be held down by falling oil prices. Carney also skirmished with former Conservative chancellor Nigel Lawson on climate change. Lawson accused the bank of “focusing on green claptrap” in its recent examination of the potential collapse of the global carbon industry and any knock-on effects this could have on sectors such as insurance. Carney pushed back strongly, describing the potential impact of climate change as a fundamental issue for regulators of the insurance market, which would face gigantic losses if, for example, new laws mandated that carbon energy assets had to remain unburned and in the ground. Today at 15:00 GMT, the National Institute of Economic Research will release its monthly estimate of Gross Domestic Product growth over the past 3 months.

EUR Another day, another bout of euro weakness seems to be the pattern this week, and yesterday was no exception. Storm clouds gathered on the political front, as Eurogroup president Jeroen Dijsselbloem called on Greece to step into line and comply with the conditions of its lending programme. The normally diplomatic Dijssellbloem was unusually frank, saying of Greece’s chances “Just receiving the money without any action – it’s not going to happen”. In the meantime, sovereign bond yields in the eurozone continued their steady decline. In particular, German 10 year government bonds have shown a steady fall towards zero return, and currently trade at a yield of 0.207%. Today, talks between Athens and its creditors will finally begin, while government bond yields look set to fall further.

USD The United States dollar was there to pounce on the euro yesterday, helped along by the release of more optimistic labour market data. The Job Openings and Labour Turnover Summary showed the highest number of job openings since January 2001. The fact that Job openings are at a high despite three months of rampant job creation is indicative of extraordinary strength in the labour market, and yet another bullish sign for the dollar.

CAD No data was released for CAD yesterday, but USD strength saw loonie weaken in the afternoon. Crude oil prices continued to fall, contributing to CAD’s weakness. No data will be released today, meaning that developments elsewhere and momentum will continue to dictate CAD’s tone.

UK News

  • FT. ‘Foolish’ to cut interest rates, says Mark Carney: Mark Carney says it would be “foolish” to cut interest rates or expand quantitative easing in response to falling oil prices, unless lower inflation hurts wage growth, consumer spending and business investment.
  • Reuters. London financial sector jobs jump 17 percent in February: Jobs in London’s financial services sector rose 17 percent in February compared to a year ago, buoyed by strong equity markets around the globe and improving economic sentiment, even as British banks continued to cut headcount.
  • Telegraph.  UK growth strengthens but balance to remain a challenge, says BCC: Leading business lobby group expects UK growth to strengthen this year, as low inflation fuels consumer boom.