Morning Report: 12 March 2015

12th March 2015 By: Ranko Berich

GBP Markets followed a familiar pattern yesterday: the US dollar advanced, and everything else retreated. Sterling was no exception, falling to its lowest level against USD this year. Data for Manufacturing Production and Industrial Production in January disappointed expectations, falling 0.5% and 0.1% respectively. Some of the fall was due to month to month volatility in the electronics sector, after a large defence related spike in December. Production remained healthily up on a year on year basis. The National Institute for Economic and Social Research estimated that the economy grew a healthy 0.6% in the three months to February, rounding off a day of reasonably solid data, once the volatility in production output is taken into account. Today at 09:30 GMT, Trade Balance Data for January will be released, and at 12:45 Bank of England Governor Mark Carney will speak in Sheffield.

EUR The euro continued its decline yesterday, as the European Central Bank’s quantitative easing programme performed as expected, lowering asset yields across the euro area. ECB President Mario Draghi was confident in a speech before an ECB conference in Frankfurt, stating the obvious: that the QE programme was already working. Relations between Greece and Germany reached a new low as Greek ministers threatened to repossess German property to pay WW2 reparations.  In the meantime, negotiations between Greece and the Eurogroup over additional financing to Greece began. The situation is ongoing, and although neither party appears to want a Greek exit from the euro, the hardball negotiating tactics used by both sides mean that a deterioration in relations could lead to volatility in the markets at any time.

USD A lack of United States data releases proved no hindrance for the dollar yesterday, which continued its inexorable advance, proving especially strong against the euro, sterling, and Norwegian Krone. Crude oil inventories in the United States fell to 4.9m barrels, a surprisingly low decline that may be an early hint at a moderation in the supply glut currently dominating North American crude markets. Even at 4.9m barrels, stockpiles remain high by historical standards. Today at 13:30 GMT, crucial Retail Sales data will be released together with weekly Unemployment Claims, followed by Business Inventories at 14:00.

CAD Cad stepped aside for USD yesterday, reaching yet another low against the greenback. Only a slight rally has been seen as of this morning. The drought of Canadian data will be broken today by the release of the New House Price Index at 12:30 GMT, accompanied by the Capacity Utilisation Rate.

UK News

  • FT. Little sign of ‘hidden’ jobless in self-employment boom, says BoE: A UK self-employment boom is largely the result of structural shifts in the workforce rather than evidence of “hidden unemployment”, the Bank of England has concluded.
  • FT. Drop in supply pushes up UK house prices outside London: A fall in the number of houses coming on to the UK market is pushing up prices outside London, according to a property professionals.
  • FT. UK manufacturing output falls in January: UK manufacturing output fell unexpectedly in January, dealing a blow to hopes that the sector was recovering after a weak spell in the autumn.
  • Telegraph. Strong pound could keep UK in deflation, warns Bank of England rate setter: Sterling’s strength could keep inflation low in conjunction with a tumble in the price of oil, says Martin Weale, a member of the Monetary Policy Committee.
  • 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.
  • Daily Mail. Stamp duty revenues set to hit record £8bn thanks to booming housing market in another boost for Osborne ahead of the Budget: Stamp duty revenues are set to hit a record high of £8billion in the current financial year thanks to a soaring housing market, providing a boost to Chancellor George Osborne ahead of next week’s Budget.