Morning Report: 22 April 2015

22nd April 2015 By: Ranko Berich

GBP Sterling reversed its recent downwards drift against USD yesterday, and rallied strongly in the afternoon. No fundamental data was released, but the election campaign continued with polls showing conflicting results. The latest projections from the Financial Times place the Conservatives in the lead, but losing votes while Labour and the SNP gain. Crucially, viable coalitions for the Conservatives seem hard to cobble together: an extremely unlikely marriage between the Conservatives, Liberal Democrats, Democratic Unionist Party and Ukip together could muster only 317 seats, according to the Times. A hung parliament seems a foregone conclusion at this point, meaning that volatility for sterling is likely to pick up as the date of the election approaches. Today at 09:30 BST, minutes from the Monetary Policy Committee’s latest meeting will be released, including official member votes. The Bank of England remains extremely cautious at present, and the minutes will be interesting because they will detail debate around the members outlook for the labour market and inflation, an extremely uncertain topic in the UK at present.

EUR The euro was volatile yesterday, but ultimately closed very near to where it opened against USD. Speculation continued about if Greece will be able to meet its upcoming debt obligations, and if a failure to pay one of its creditors will result in a departure from the euro. Such discussion will prove academic if Greece and its creditors are able to strike an agreement for continued bailout funding. Speculation in the press continued on this topic, but no substantial new information emerged about the state of negotiations, with the next Eurogroup finance ministers meeting due this Friday. Eurozone ZEW Economic Sentiment rose to its highest level in more than a year in April, but the same measure for Germany recorded a decrease. Today at 15:00 BST, Consumer Confidence figures for the eurozone will be released.

USD Yesterday saw the dollar go sideways, weakening slightly to sterling and posting no significant change against the euro despite intraday volatility. In the meantime, information from the Ports  of Los Angeles, Seattle, Tacoma and Oakland showed container import numbers surge to a record high, suggesting that the global dominance of the US as the world’s most important market is far from over. Today at 14:00 BST the House Price Index will be released, followed at 15:00 by Consumer Confidence figures.

CAD CAD weakened yesterday before finding its legs in the early hours of this morning, despite weak Wholesale Sales data. Wholesale sales continued to decline, falling 0.4% in February after plummeting 2.9% previously. Building materials and supplied recorded the largest decrease. The fall is obviously partly due to the cold weather conditions experienced by Canada, but the question for the loonie will be just how rapidly the economy will recover in spring.

UK News

  • Reuters. Fiscal freedom for Scotland would mean spending cuts, tax rises – think-tank: Scotland would have to make “substantial” spending cuts or increase taxes if the Scottish National Party (SNP) gained full control of the country’s finances after next month’s general election, the Institute for Fiscal Studies said on Tuesday.
  • Daily Mail. UK budget shame: Britain has the third highest deficit in Europe and the Government is borrowing more than Greece: Britain has the third biggest budget deficit in Europe and the Government is borrowing even more than Greece, official figures showed yesterday.