Morning Report: 14 September 2015
14th September 2015 By: Ranko Berich
GBP Last week saw sterling finally find its legs and mount a decent rally against USD, leaving GBPUSD up week on week as of the time of writing. This week’s Federal Reserve meeting in the United States is likely to dominate all financial markets, including sterling, but the UK will have its own important releases this week that could generate some genuine movement on sterling pairs. Inflation data will be released tomorrow at 09:30 BST, followed on Wednesday at the same time by labour market data including the Average Earnings Index. After last week’s Bank of England minutes showed the MPC was satisfied that productivity growth was holding down unit labour costs, the downwards trend in core inflation over recent months will be in the spotlight. The labour market has been slowing down slightly according the recent releases, and so any further deterioration in headline unemployment is likely to hammer sterling.
EUR The euro not only benefitted from the dollar sell off seen last week, but also resisted any depreciation versus sterling. Friday’s fundamental data showed a concerning deterioration in German wholesale prices, at a time when the European Central Bank has made clear its concern about the downside risk to inflation in the eurozone. Although eurozone Industrial Production figures will be out this morning, the week’s main euro data will begin to flow tomorrow, with the release of the German ZEW Economic Sentiment survey, a widely followed survey of German investors and analysts. An equivalent survey for the eurozone will be included in the 10:00 BST release. At the same time, eurozone Trade Balance and Unemployment data will be released. The actual headline Consumer Price Index will be released at 10:00 on Thursday.
USD This week’s Federal Reserve meeting is the most anticipated and important global financial event of the year by far, and the dollar will be utterly dominated by this event. Last week, on top of low weekly Initial Jobless Claims, Job Openings in the economy reached an all-time high, both signs of labour market tightness and a reason for optimism on the dollar. However, no amount of data will help the dollar if the Federal Open Markets Committee is seen to be dovish, or averse to hiking rates this week. At the moment, the Futures market implies a 26% chance of a rate hike on Thursday. Along with the all-important rate decision, the FOMC will release a rate statement and updated economic projections on Thursday at 19:00 BST. All of this will be followed half an hour later by a press conference from Fed Chair Janet Yellen, which markets will, as ever, also be analysing for any clues as to any future policy moves.
CAD Although CAD has been volatile against USD on a day to day basis, the last two weeks of trading have been consistently defined by a broad trading range, with troughs and peaks in USDCAD roughly in line with their previous equivalents. Although it’s clear the oil-related parts of Canada’s economy will continue to struggle in the future, the rest of the economy is expected to pick up some of the slack, with exports benefitting from a weaker loonie. For this reason, Wednesday’s Manufacturing Sales release will be closely watched. Later in the week, Consumer Price Index data will be out on Friday.
- Reuters. UK rates need to rise “relatively soon” – Bank of England’s Weale: A Bank of England policymaker said interest rates need to rise “relatively soon” as wages pick up, adding to signs that support is gradually building for the first increase in British borrowing costs since before the financial crisis.
- Reuters. Weak UK construction data adds to signs of cooling growth: The amount of new housing built in Britain fell for the first time in more than two years in July, despite rising house prices, driving a broader decline in construction that adds to signs that the country’s economy is slowing.
- Telegraph. Rain wrecks retailers’ hopes in summer of the stay-aways: High street footfall fell for the third month in a row last month, putting pressure on retailers.