Morning Report: 21 April 2015

21st April 2015 By: Ranko Berich

GBP Yesterday was a relatively quiet day for sterling, which drifted lower against USD amid a lack of headline fundamental data. Mortgage lender Rightmove released its House Price Index, which showed a national price increase of 1.6% in April. The regional breakdown of price levels showed that everywhere except for Wales had experienced growth over the last year, with London seeing the highest increases in prices. No sterling data will be released today, but the election campaign will continue, with the latest Guardian/ICM poll showing the Conservatives still holding a slight lead over Labour, while Lib Dems, Ukip and the SNP continue to gain momentum.

EUR The euro appears to be trending downwards again after a day of fairly consistent declines yesterday. The German Producer Price Index yesterday showed that prices paid by producers for inputs rose 0.1% in March, a meagre improvement but nonetheless the second consecutive month of growth after serious declines in February and January. Today at 10:00, research agency ZEW will release Economic Sentiment survey results for Germany and the Eurozone. The German figures in particular are watched by markets due to the importance of the German economy, and the large sample size of economists, analysts and institutional investors. The survey seeks to gauge the optimism of those “in the know” about the German and eurozone economy, and has seen substantial improvement in recent months off the back of the European Central Bank’s quantitative easing programme.

USD The dollar did well on the whole yesterday, during a day of high volatility on crude oil markets. No Fundamental data was released, but New York Federal Reserve president William Dudley gave a speech that added slightly to hopes for interest rate hikes this year. Dudley emphasised that the data would determine monetary policy, but did note that stronger US growth and resilience in emerging markets reduced the risks of potential disruption to the global economy. No US data will be released today.

CAD CAD was affected by a mid-day plunge in oil prices yesterday, but recovered as the shock receded from markets. Crude remains incredibly volatile, with downwards pressure being created by reports of large stockpiles of crude in North America and soaring production in Saudi Arabia, but upwards pressure stemming from conflict in Yemen, which is a major OPEC producer. A note produced by JP Morgan said “Saudi Arabia alone added the equivalent of half of Bakken production in a matter of months”. The Bakken shale formation has been the backbone of the surge in North American crude production. The increase in OPEC production suggests that the cartel could be attempting to squeeze North American producers by encouraging a sustained drop in prices, although how susceptible North America’s shale producers will be to such a strategy to be remains to be seen. The Bank of Canada’s Stephen Poloz also hinted yesterday that the BoC is unlikely to engage in further rate cuts, stating that the Bank had taken the appropriate amount of “insurance” against negative oil shocks by cutting rates earlier this year.

UK News

  • FT. UK economy failing to innovate: Britain has been issued a fresh warning over its poor record in innovation and embracing technological change, with new estimates showing a key measure of productivity fell in 2014 for the third year in a row.
  • BBC. Item Club predicts UK economic growth of 2.8% this year: Low inflation and stronger euro zone growth should help the UK economy expand 2.8% this year despite political uncertainty ahead of the election, according to an EY Item Club report.