Morning Report: 20 April 2015

20th April 2015 By: Ranko Berich

GBP As the election campaign continued on Friday sterling performed well, especially against a US dollar that was decidedly on the back foot. Friday’s labour market data was broadly positive, but still inconclusive. Unemployment fell to a fresh low, but wage growth slowed to 1.7% growth in the Average Earnings Index, compared to the same three month period to February 2014. This week will be light on UK data, although the Monetary Policy Committee’s official members’ votes from the last meeting will be released on Wednesday at 09:30 BST, and Retail Sales data will be released on Thursday at the same time. The election campaign will continue to be fought, and as the likelihood of a hung parliament increases, so does the potential risk to sterling.

EUR Speculation that Greece will be forced out of the eurozone is rife in the media, but the euro itself has shrugged off this risk to perform reasonably well in recent sessions. The Consumer Price Index ticked along in March, falling 0.1% year on year. Core CPI, which excludes food and fuel, rose 0.6% year on year, the same annual rate as in February. This week will see the release of one of the the key sentiment gauges for the German Economy, research agency ZEW’s Economic Sentiment survey, tomorrow at 10:00 BST. Equally important will be IFO’s Business Climate survey for Germany, out on Friday at 09:00. Friday will also see the latest Eurogroup finance ministers meeting, during which the ministers need to decide if they will accept Greece’s proposed reforms and offer extended bailout funding in return.

USD The United States dollar struck a hesitant tone last week, as a series of data releases disappointed expectations. Though harsh weather conditions have certainly weighed on economic activity, markets seem hesitant to advance USD further before the fundamental data improves. Friday’s release of Consumer Price Index inflation showed that inflation was still performing well, and that prices rose 0.2% month on Month in March, regardless of if food and fuel were included or not. The House Price Index will be released on Wednesday at 14:00 BST, followed by Durable Goods orders on Friday at 13:30.

CAD A bundle of positive CAD data was released on Friday, and loonie reached its strongest level against the US dollar since the very beginning of the year. Since then CAD has weakened somewhat, while still remaining significantly stronger compared to the start of last week. Inflation and Retail Sales both exceeded expectations on Friday, with Retail Sales recovering an impressive 1.7% month on month in February, after two months of decline previously. The fact that CAD at first strengthened dramatically on this news and then retraced afterwards suggests that crude oil markets remain critical to CAD’s direction. Conflicting reports of soaring OPEC production, decreasing North American production and soaring North American storage mean that crude oil is likely to remain volatile this week, and this will continue to affect CAD.

UK News

  • Reuters. Asking prices for homes in England hit new high – Rightmove: Asking prices for homes on sale in England and Wales hit an all-time in the month to early April, pushed up by a fall in the number of properties on the market, property website Rightmove said on Monday.
  • Guardian. UK jobless rate falls to 5.6%, lowest since 2008, but pay still sluggish: Economists say fall in unemployment is still not feeding through to consumers in the form of higher wages.
  • Telegraph. UK economy has reached ‘escape velocity’: Growth in the UK economy expected for 2016 by the EY Item Club.