Morning Report: 19 November 2015

19th November 2015 By: Ranko Berich

GBP Although no major UK data were released yesterday, sterling continued its upwards path against both USD and EUR. The only event of note was come comments from the Bank of England’s Ben Broadbent. Speaking at a Reuters event, the Deputy Governor said that markets should not be focussed obsessively on the Bank’s forecasts, as they were subject to both change and uncertainty. Broadbent also pushed back against those trying to commit the Bank to a time frame for any monetary policy actions, stating that “some of the coverage which essentially … went along the lines of saying ‘Bankers said interest rates won’t go up till ‘x” was just misplaced”. Although markets took the tone of the speech to be rather hawkish, in reality, Broadbent’s sentiment perfectly lines up with the prevailing view of the Monetary Policy Committee, which is firmly in “wait and see” mode. Today at 11:00 GMT, the Confederation of British Industry will release its Industrial Order Expectations survey for November.

EUR The euro took another knock back yesterday, falling to fresh lows vs USD before the release of central bank minutes in the United States, and then briefly surpassing even those lows afterwards. No data or speakers of note disrupted the overwhelmingly bearish market sentiment on the euro. Today at 09:00 GMT the eurozone’s Current Account will be released, followed at 12:30 by the European Central Bank’s latest meeting minutes. Considering how receptive ECB speakers have been to further monetary easing, and the fact that a review of how much accommodation is necessary has been promised for this year, attention will be focussed on any hints of more QE, as well as any notable dissenters.

USD At first glance it would seem that yesterday’s Federal Open Market Committee meeting minutes were hawkish, as the USD strengthened against EUR in the immediate aftermath. However, looking at the dollar’s performance in aggregate versus the G10, it would seem the greenback has hit a brick wall. As of the time of writing, the dollar is weaker versus nine of the 10 G10 currencies than it was at midnight on Monday. This suggests that markets are hesitant to advance USD any further after its rapid and significant gains over the last few weeks. Last night’s FOMC minutes, although seemingly supportive of the idea of a rate hike, actually added no additional certainty to the picture for US monetary policy. It is hardly new information that the Fed will probably raise interest rates in December given that economic data keeps improving and there are no substantial shocks to markets, and as such yesterday’s minutes were no game changer for USD. Today, weekly Unemployment Claims data will be released at 13:30 GMT, followed at 15:00 by the Philadelphia Federal Reserve’s Manufacturing Index and the Conference Board’s Leading Index. Later in the day, Fed members Lockhart and Fischer will speak at 17:30 and 21:45 respectively.

CAD A top may finally be in place on USDCAD, for the time being. After reaching a level just below Monday’s highs in the aftermath of yesterday’s FOMC minutes in the United States, USDCAD has since fallen and the loonie is now at its strongest point vs USD since last week. Weekly crude inventories rose by only 0.3 million, perhaps indicating that supply may be about to stabilise in the US after weeks of rapid inventory accumulation. Today at 13:30 GMT, Wholesale Sales data for September will be released.

UK News

  • Reuters. British car production dips in October as demand at home falls: The number of cars built in Britain fell slightly in October as an increase in exports failed to outweigh a drop in demand at home, industry data showed on Thursday.
  • Reuters. Bank of England’s Broadbent says market rate bets can mislead: A senior Bank of England policymaker said on Wednesday that pricing in financial markets for when Britain’s record-low interest rates are likely to rise could be misleading and risked changing quickly.