Morning Report: 23 November 2015

23rd November 2015 By: Ranko Berich

GBP On the whole sterling showed only slightly more resistance than the euro to last week’s prevailing theme of US dollar strength. Friday’s data showed government borrowing fall slightly, to £7.5bn in October. Looking ahead, this week will be dominated by Wednesday’s Autumn Statement from the Treasury, and Friday’s second release of Gross Domestic Product Growth, alongside the Index of Services and Business Investment data.

EUR The euro’s fall over the last six weeks has been relentless, with this morning seeing a fresh low for the month against the US dollar. Friday’s events supported the prevailing expectations of further European Central Bank easing action. German Producer Prices fell 0.4% month on month, and ECB President Mario Draghi gave yet another dovish speech in which he re-iterated the Bank’s commitment to doing whatever is necessary to lift inflation. This will be a busy week for the euro, beginning with this morning’s Purchasing Managers Indices from France, Germany, and the Eurozone as a whole at 09:00 GMT. Tomorrow, final German Gross Domestic Product data for the third quarter will be released, alongside the widely watched IFO Business Climate survey. Later in the week, M3 Money Supply data will be released on Thursday.

USD After a brief wobble over the back end of last week, the US dollar is once again looking sharp this morning, strengthening vs almost all of the G10 overnight. Speeches from the Federal Reserve’s Bill Dudley and John Williams further supported the dollar, with both policy makers sounding optimistic about the economy and hawkish on interest rates. It now seems overwhelmingly likely that the Fed will raise interest rates in December, meaning that it is now up to US data to confirm or challenge this assumption. Today at 14:45 GMT Manufacturing Purchasing Index data will be released by Markit, followed at 15:00 by Existing home sales. Tomorrow, revised Gross Domestic Product Growth for the third quarter will be released, and Durable Goods Orders will be released alongside Personal Spending and Income on Wednesday.

CAD Crude oil prices continue to languish in the low 40s, and, combined with a strong US dollar, this has meant misery for the loonie, which has weakened sharply in recent sessions. One positive effect of the weakening loonie has been on consumer prices, with Friday’s data showing Core CPI rising an impressive 0.3% in October. Retail Sales were not so buoyant, falling 0.5%. The first half of this week will be slow for CAD, with only a speech from the Bank of Canada’s Lynn Patterson on Tuesday. Later in the week, price indices for Raw Materials and Industrial Products will be released on Friday.

UK News

  • Reuters. UK sees worst October for government borrowing since 2009: British public finances recorded the worst deficit for any October since 2009, making it more likely Chancellor George Osborne will miss his annual borrowing target, as he prepares for a major spending review next week.
  • Telegraph. Autumn Statement 2015: Business leaders back Osborne to push ahead with spending cuts: Chancellor has now agreed the cuts to departmental budgets but faces struggle to meet £10bn surplus forecast.