Morning Report: 11 December 2014

11th December 2014 By: Ranko Berich

GBP Yesterday’s trading looked a lot like the calm eye in the middle of a storm, and volatility subsided on the major currency pairs, including sterling. The United Kingdom’s Trade Balance showed the narrowest trade deficit in seven months at 9.5 billion GBP, with the improvement driven mainly by lower fuel imports. As of June, the trade deficit represented 1.4% of Gross Domestic Product, a manageable level by historical standards. This morning, the Royal Institute of Chartered Surveyors released its House Price Balance, which was slightly lower than expected at 13%. This means that just 13% of surveyors were reporting overall increases in house prices, but as the figure remains in positives the surveyors reporting increases still outnumbers those reporting contraction in prices.

EUR The euro surprised expectations yesterday and rose to levels against USD that certainly would have looked unlikely if suggested at the beginning of the week. The fundamental data released yesterday certainly gave no cause for eurozone optimism. French Industrial Production contracted, as did payrolls. This morning, Consumer Price Index data for Germany and France in November has already been released. Inflation in Germany remained unrevised at 0.0%, and prices contracted in France by 0.2%. This morning at 09:00, the European Central Bank will release its monthly bulletin of statistics, at the same time as Italian Industrial Production Data will be released. The tone in eurozone data has undoubtable been gloomy of late, and this morning’s released are not expected to deviate from this theme. Also out this morning at 10:15 GMT will be the details of the ECB’s Targeted Long Term Refinancing allotments, or how much money the ECB has managed to lend to banks in the hopes of stimulating the economy.

USD After an incredibly strong start to the week, the United States dollar weakened yesterday, retracing its steps against GBP and EUR. This afternoon’s release of Retail Sales at 13:30 GMT has the potential to once again send the dollar soaring. Expectations are high for the reading as it will contain the full details of retail sales in November, including the crucial Black Friday period that retailers have staked much on. Wholesale inventories have been rising for the last few months, and the retail sector has gone on a hiring spree in the hopes the consumer will oblige with a holiday shopping spree. Some initial statistics of Black Friday sales suggested that the total spend may have fallen slightly, but today’s data will contain details for the entire month and is therefore a “moment of truth” for consumer spending in the US economy. Also out at the same time will be weekly Unemployment Claims, Import Prices. Later in the afternoon at 15:00, Business Inventories will be released.

CAD CAD drifted lower against the US dollar yesterday, but markets stopped just shy of weakening loonie decisively. The Bank of Canada’s Governor, Stephen Poloz, will speak today at 13:00 GMT to the Economic Club in New York. Poloz is a canny operator and has steered clear of making any statements that might strengthen the Canadian dollar, in order to help exporters as much as possible. This is certainly something that can be expected to continue, but today’s speech may include some hints as to just how concerned the BoC is about inflation in Canada at the moment. At 13:30, The New House Price Index will be released, together with the Canadian economy’s Capacity Utilisation Rate.

UK news

  • FT. Stamp duty reforms to boost UK house sales: Stamp duty reform will boost UK house sales by as much as five percent during the next year, according to a survey of estate agents.
  • FT. UK trade deficit narrows after decline in oil imports: Britain’s trade deficit improved in October after a fall in oil imports and a small rise in exports, but economists warned the prospects for the country’s exporters were poor despite the better than expected data.
  • Reuters. UK house price growth slows to 18-month low – RICS: British house prices grew at their slowest rate in a year and a half during the past three months, a property industry body said on Thursday, but a planned cut to property taxes is likely to temper the lull in sales.
  • Telegraph. Britons are living beyond their means, says OBR: Head of Government’s fiscal watchdog says consumer spending has accelerated ahead of pay growth at its fastest rate since the 1990s.
  • Telegraph. Silver exports help UK trade deficit narrow in October: UK trade helped by sales of silver to India, official statistics show, while imports fall by nearly £700m.