Morning Report: 20 October 2015

20th October 2015 By: Ranko Berich

GBP Sterling recovered yesterday from the slight wobble it had late in Friday’s session and again began to strengthen against both EUR and USD. Property website Rightmove did release its House Price Index, showing the highest ever national average of property coming to market. The release described a “vicious circle” of buy to let investors going “head to head” with first time buyers. Although the Government has made a lot of noise about addressing Britain’s housing shortage, little effort appears to have been made in addressing what most economist believe is the root cause of the problem: excessive building regulations, often implemented on a local level, and the green belt surrounding London. Two speakers from the Bank of England are scheduled today; notable hawk Ian McCafferty at 10:45 BST and Governor Mark Carney, who will testify to lawmakers at 11:00 regarding the Bank of England bill. In the meantime, British politicians and royalty will kowtow to Chinese President Xi Jingping, who begins a four day visit to the United Kingdom today.

EUR The euro saw further losses to USD yesterday afternoon, but has since shown some sign of looking like staging a small rally. The European Central Bank’s Ewald Nowotny, who yesterday weakened the euro with some widely circulated comments about the ECB missing it’s inflation target, was on the wires again. Nowotny this time tempered his previous comments by stating that it was too early to talk about adjusting the ECB’s asset purchasing programme, but the mixed messages are likely to do little but raise anticipation for Thursday’s ECB press conference, when President Mario Draghi will explain all to reporters. This morning German Producer Prices have already fallen short of expectations, contracting 0.4% after falling 0.5% previously, and Current Account data for August will be released at 09:00 BST.

USD USD is once again under pressure this morning, having weakened overnight against most of the G10. Supposed Federal Open Market Committee rebel Lael Brainard was once again on the wires yesterday after a speech on community banking, but avoided the contentious topic of rate hikes after advocating for delaying increases in interest rates in a controversial speech last week. San Fransisco Fed President John Williams played down any talk of a split within the FOMC during an interview with Bloomberg yesterday, stating that the economy remained on a good trajectory and the economy would remain “high pressure” even after the modest rate hikes he envisages the Fed implementing over the coming years. Today at 13:30 BST Building Permits and Housing Starts will be released, and no less than three FOMC members will speak this afternoon, with Dudley, Powell, and Chair Yellen herself speaking at 14:00, 14:15 and 16:00 respectively.

CAD Canada’s election has had a rather subdued effect on the loonie, which has weakened slightly over the last two trading sessions after reaching its strongest level against USD since July last week. Justin Treudeua’s liberals have sealed a stunning victory against Stephen Harper’s 9 year old conservative government, promising a stronger stance on climate change and looser fiscal policy. The prospect of looser fiscal policy may eventually prove a negative for the loonie but a positive for the Canadian economy, but much depends on other factors such as commodity prices, financial conditions and the international economy. Today at 13:30 BST Wholesale Sales data for August will be released.

UK News

  • Guardian . Treasury set for tense talks with ministers over proposed £20bn savings: A tense round of negotiations is to be held at senior levels in Whitehall over the next month as a series of cabinet ministers fight Treasury plans to produce departmental savings of £20bn in next month’s spending review.