Morning Report: 23 March 2015

23rd March 2015 By: Ranko Berich

GBP Sterling ended up closing up last week against USD, after a series of swings that saw it reach its lowest point since 2010, but also a 3.6% rally from this low. With sterling very much still in flux, especially against USD, this week’s fundamental releases will be even more closely watched than usual. The first crucial release, in light of last week’s sluggish earnings data, will be tomorrow’s 9.30am Consumer Price Index. Later in the week, Retail Sales data will be released on Thursday at 09:30, and no less than three separate speakers from the Monetary Policy Committee are scheduled for Friday. Today at 11:00 GMT, the Confederation of British Industry will release its survey results for Industrial Order Expectations.

USD The US dollar also had a wild ride last week, especially against the euro where the weekly trading range was an astonishing 5.59%. After the Federal Open Markets Committee removed the word “patient” from their forward guidance last week, interest rates could rise at any subsequent Fed meeting, but only if justified by economic conditions. This week’s crop of fundamental data will be closely scrutinised, especially Tuesday’s release of the Consumer Price Index at 12:30 GMT. Later in the week Durable Goods orders will be out on Wednesday, also at 12:30, and the final revision of Gross Domestic Product growth in Q4 2014 is scheduled for Friday at the same time. Today at 14:00 , Existing Home Sales data will be released, followed by a speech from the FOMC’s Stanley Fischer at 16:20.

EUR Green shoots continued to appear in the eurozone’s economy last week, with some slightly better than expected inflation data and optimistic sentiment survey results. Political wrangling continued between Greece and its creditors, but there were no signs of an impending breakdown in talks, and therefore the euro itself did not suffer. This week is likely to see more of the same, with a series of Purchasing Managers Indices for France, Germany, and the eurozone as a whole due for release on Tuesday morning. PMI surveys essentially ask a broad range of managers in the economy how healthy business currently is and how healthy their outlook for the future is. As such, they provide a good snapshot of economic activity. With the European Central Bank’s quantitative easing program wrapping the eurozone economy in the warm embrace of easy money, broad improvement is expected in the PMI figures. Money Supply data, released on Thursday, will be relevant because of the lending data that is released with headline money supply. Today at 14:00 GMT, Mario Draghi of the European Central Bank will speak, and at 15:00 GMT Consumer Confidence data for February will be released.

CAD The loonie appears to have regained some strength last week, although with oil prices still fluctuating, a plunge to fresh lows remains a possibility. Friday’s data releases gave little cause for optimism. The Consumer Price Index did show a healthy increase in prices in February, helped along no doubt by the weaker Canadian dollar. However, Retail Sales fell a whopping 1.7% in January, suggesting the economy started the year on the back foot. This week will be sparse in terms of Canadian data, although the Bank of Canada’s Governor Stephen Poloz will speak on Thursday at 13:30 GMT, before the government’s annual budget release at 20:00.

UK News

  • FT. Student loans drive up debt while investment: A rise in student debt will cause unsecured borrowing in the UK to hit a record high in 2015, while investment in research and development continues to lag well behind the European average.
  • FT. UK deficit falls in boost to Tories: The UK’s public finances improved further in February, making it increasingly likely that George Osborne will meet his annual deficit reduction forecasts in the run up to May’s general election.
  • Reuters. A British EU exit could hit GDP by 2.2 percent – study: Britain leaving the European Union could result in a permanent loss of 2.2 percent of the country’s gross domestic product by 2030, and the costs would not be offset solely by striking a free trade deal with its former partners, think tank Open Europe said.
  • Reuters. UK public finances improve in February, leaving Osborne on course for target: Chancellor George Osborne could beat his government borrowing target for this year after public finances improved sharply last month, bolstering his pitch to voters ahead of a national election in May.
  • Daily Mail. Households set for spending power boost as inflation is set to near ZERO per cent – but spectre of deflation hangs over Britain: Inflation will drop almost to zero this week with economists predicting that official figures will show prices rising at just 0.1 per cent.